Supplementary Pension Insurance and Pension Savings: How Can You Save for Retirement?

Quick Overview: Retirement Savings in 2026

Supplementary pension insurance is an older product that could only be purchased until November 30, 2012. Supplementary pension savings is a newer product that can still be taken out today. With both, you can receive government support, tax benefits, and employer contributions, but they differ in terms of investment risk, payout options, and flexibility.

Not sure whether early retirement, pre-retirement, or working in retirement is right for you? We’ll help you verify whether the authorities have correctly calculated all your insurance periods and income.

In the past, the pension system consisted of three pillars. However, the second pillar—based on pension savings—was abolished, and today the entire system rests solely on the first and third pillars.

The first pillar is the cornerstone of the Czech pension system and consists of pay-as-you-go pension insurance. Participation is mandatory, and it operates through regular contributions deducted from wages and other types of income.

The third pillar, on the other hand, is voluntary and consists ofsupplementary pension insurance and supplemental pension savings. It allows people to increase their pensions beyond what the first pillar provides through their own efforts. It is, therefore, an individual retirement savings plan supported by the state through financial contributions and tax incentives.

Supplementary Pension Insurance

Supplementary pension insurance was introduced in 1994 as a state-regulated long-term savings product. It was possible to enter into a supplementary pension insurance contract until November 30, 2012. Since 2013, supplementary pension insurance has been transferred from pension funds to transformed funds, which are managed by pension companies.

The transformed fund operates on the basis of conservative investments in safe assets. This means that the money does not appreciate significantly on its own, but at the same time, clients are guaranteed that they will not incur a loss. The original terms and conditions—such as government contributions and tax benefits—still apply to pension savings.

Supplementary Pension Insurance – Government Contribution

Government support for supplementary pension insurance is provided based on the contributions made by the clients themselves. How exactly does it work?

• Amount and Conditions of the Contribution: The government contribution is paid monthly, and its amount depends on the amount of the regular contribution you make to your supplementary pension plan. The minimum regular contribution for which the government provides a contribution is 500 crowns.
• Increase in State Support: If you contribute at least 500 korunas, the state adds 20% of your contribution amount. The maximum state contribution is 340 korunas per month. State support increases linearly as your contribution increases. For example, for a contribution of 500 CZK, the state contributes 100 CZK; for 1,000 CZK, 200 CZK; and so on, up to the maximum amount.
• Eligibility requirements: To receive state support, you must have permanent residence in the Czech Republic or the EU, or be enrolled in the Czech health or pension insurance system. State support is therefore not contingent on age, nationality, or citizenship, but rather on residence in the Czech Republic and enrollment in the insurance system.

Supplementary Pension Insurance – Employer Contribution

Your employer may also contribute to your supplemental pension plan—how does this contribution work, and what are its benefits?

Benefits for Employees

• Increased savings: Employer contributions significantly boost the balance of an employee’s supplementary pension account.
• Exemption from taxes and social security contributions: Annual contributions to a supplementary pension plan up to 50,000 crowns are exempt from income tax, and no social security or health insurance contributions are deducted from them.

Benefits for Employers

• Tax benefit: Contributions to a supplementary pension plan are tax-deductible expenses, which reduce the employer’s taxable income.
• Savings on Contributions: The employer does not pay health and social insurance contributions for the employee, which further reduces overall costs.

Comparison with a Pay Raise

As we’ve already mentioned, an annual contribution to a supplementary pension plan of up to 50,000 crowns is exempt from income tax, and no social security or health insurance contributions are deducted from it. Ultimately, this results in a savings of 11.6% compared to if this money were paid directly to the employee.

Supplementary Pension Insurance – Taxes

In addition to government contributions, supplementary pension insurance is also supported by a tax deduction. If you save at least 1,700 crowns per month, your taxable income will be reduced by twelve times the amount exceeding this threshold. So, for example, if you save 2,000 korunas a month, you’ll save a total of 540 korunas in taxes. The maximum tax deduction is 7,200 korunas if you save 5,700 korunas each month.

Withdrawals from a Supplementary Pension Plan

You may be eligible to receive funds from your supplemental pension plan in a number of situations:

Lump-Sum Payout

You can have the entire amount paid out at once if you are eligible for a pension from your supplementary pension plan (e.g., old-age or disability) and have paid into the plan for the required minimum period (3 or 5 years). You will receive the full amount, including government contributions and investment returns. However, you should be aware that investment returns and your employer’s contribution will be taxed at a rate of 15 percent.

Old-Age Pension

In the case of an old-age pension, supplementary pension insurance can usually be paid out starting at age 60, provided you have contributed for at least 5 years. However, the specific age and contribution period depend on the particular pension plan.

In this case, all of your contributions and government contributions are paid out, and the amount is tax-free—including the employer’s contributions. If you have the amount paid out over at least 10 years, the returns will also be tax-free.

Disability Pension

Your supplemental pension insurance benefits may also be paid out if you are granted a disability pension and have met the mandatory insurance period. The specific terms and conditions again depend on your pension plan.

Payments can be made as a lump sum or as a regular annuity. The final amount also includes investment returns. If you choose an annuity, neither the returns nor the employer’s contribution are taxed; otherwise, they are taxed at a rate of 15%.

Service Pension

You are only entitled to a service pension if it is specified in your supplementary pension insurance contract. The amount paid out also depends on what is stated in the contract, but it is typically 50%.

You can have your service pension paid out after 15 years of paying into the pension plan, either as a lump sum or in the form of regular monthly payments. In the case of regular payments, neither the returns nor the employer’s contribution are taxed.

Surrender Value

A surrender is intended for situations where you urgently need money. The money you’ve saved in your supplementary pension plan can be paid out after just one year of saving. However, state contributions will be deducted from the amount, and you’ll also have to pay 15% tax on the proceeds and the employer’s contribution. If you claimed a tax credit, you will have to repay it retroactively.

Survivor’s Pension

A survivor’s pension may be paid to you in the event of the death of a client who designated you as the beneficiary in their supplementary pension plan contract. However, this client must have paid into the plan for a specified period, which depends on the specific pension plan (most commonly three years). If you have the payments made to you regularly for at least ten years, the proceeds are not taxable.

Termination of a Supplementary Pension Plan

Canceling a supplementary pension plan is based on the surrender value. In this case, however, you will forfeit the returns, and the employer’s contribution will be taxed at 15%. Additionally, if you claimed tax deductions, you will have to pay back taxes on them. If you cancel your supplemental pension plan before becoming eligible for the surrender value, you will lose your returns.

However, you do not have to cancel your supplemental pension plan entirely; you can also suspend or defer it. The specific terms depend on the particular insurance company with which you have your supplemental pension plan. Suspension is usually possible after three years of coverage.

When you suspend your plan, your obligation to pay monthly premiums ends for a specified period. During this time, you also do not receive state contributions and are not entitled to returns. Likewise, this period does not count toward the total duration of your supplementary pension plan.

A deferral works such that you do not pay into the plan for a specified period, but you will subsequently make up the payments. During the deferral period, you are not entitled to government contributions or investment returns, but this period is counted toward your total enrollment period.

Supplementary Pension Savings

Supplementary pension savings is a new product introduced in 2013, which is, in a sense, the successor to the older supplementary pension insurance. It is subject to similar rules as supplementary pension insurance— it includes government contributions, tax deductions, and employer contributions. Unlike supplementary pension insurance, however , it is more flexible and offers the potential to earn more, but also to lose more.

Pension Savings – State Contribution

The conditions for receiving the government contribution are similar to those for supplementary pension insurance. This means you must contribute at least 500 crowns per month. The government contribution increases in the same way as for supplementary pension insurance, as shown in this table:

At the same time, you must have permanent residence in the Czech Republic or within the EU, or be enrolled in the Czech health or pension insurance system. Your age does not matter at all. If you are a parent, you can also apply for government support for your minor children’s retirement savings. If you save for your child for at least 10 years, your child can withdraw up to one-third of the accumulated funds when they turn 18.

Pension Savings – Employer Contributions

Your employer can also contribute to your pension savings, which benefits both you and your employer.An annualcontribution of up to 50,000 crowns is exempt from income tax, and neither social security nor health insurance is deducted from it, which ultimately represents a savings of 11.6% compared to the amount paid directly.

Employers, in turn, can take advantage of tax benefits, as contributions to supplementary pension plans are tax-deductible expenses. This reduces their income tax base and further saves them on social security and health insurance contributions for their employees.

New as of 2026: Mandatory Employer Contribution for Certain High-Risk Jobs

Effective January 1, 2026, a mandatory employer contribution to retirement savings products will be introduced for selected high-risk jobs. This applies to employees who perform high-risk work classified in the third category based on selected working conditions. The employer must contribute 4% of the assessment base per calendar month to the employees’ supplementary pension insurance or supplemental retirement savings, provided they meet the statutory conditions. This contribution counts toward the annual limit for tax-exempt employer contributions.

Pension Savings – Taxes

The conditions are the same as for supplementary pension insurance. This means that you can also claim a tax deduction for pension savings. If you regularly save at least 1,700 crowns per month, your taxable income will be reduced by twelve times the amount exceeding this threshold. For example, if you save 2,000 crowns per month, you’ll save a total of 540 crowns in taxes. The maximum possible deduction is 7, 200 korunas if you save 5,700 korunas per month.

Withdrawing Money from a Pension Savings Plan

The options for withdrawing funds from a pension savings plan differ from those of a supplementary pension plan in several ways. Let’s take a look at when you can withdraw money from your savings:

Lump-sum payout

You can receive a lump-sum payment if you are at least 60 years old, have been saving for at least 5 years, and entered into your contract by 2023. If your contract was signed after 2023, you must save for at least 10 years.

In this case, your earnings and the employer’s contribution will be taxed at a rate of 15%. However, the employer’s contribution will not be taxed if you entered into the contract after 2023.

Old-Age Pension

You can also have the amount paid out gradually each month. The conditions for receiving this pension are the same as for a lump-sum payment—you must be at least 60 years old and have saved for 5 or 10 years.

You can have the pension paid out for at least three years, and the minimum amount is 500 korunas. Any unpaid funds continue to accrue interest.

In this case, the employer’s contribution is tax-free, and if you have the pension paid out for at least 10 years, the returns are also tax-free.

Disability Pension

You can also have your pension savings paid out as a regular pension if you are classified as having a third-degree disability and have met the minimum savings period of three years. None of these payments are subject to tax.

Here, too, the condition applies that the pension must be paid out for at least 3 years, and the minimum payment amount is 500 crowns. Additionally, payments must be made at least four times a year.

Early Retirement

Early retirement in the form of regular pension payments can be taken between five years and two years before you reach retirement age. However, you must meet the minimum savings period requirement (5 years for contracts entered into no later than 2023 and 10 years for contracts entered into after 2023). You must also have saved enough money.

You are taxed only on the returns, and the period during which early retirement benefits are paid does not affect the assessment base for the standard old-age pension.

Early retirement can affect both your finances and the timing of your departure from employment. If you’re deciding whether early retirement, early pension, or continuing to work is more advantageous for you, it’s worth checking in advance how this will impact your old-age pension.

Surrender Value

You become eligible for a surrender value after contributing for at least two years. However , state contributions will be deducted from the amount , and you will also have to pay 15% tax on the returns and the employer’s contribution. If you claimed a tax credit, you will have to repay it retroactively.

We know from experience that people often cancel their supplemental pension plans when they need money quickly, but they fail to calculate in advance the impact on government contributions, taxes, and returns. The most common mistake is to look only at the current account balance and not consider how much will actually remain after early termination.

Partial Withdrawal at Age 18

If you’ve been saving money for your child’s retirement for at least ten years, they have the option to withdraw up to one-third of those funds upon turning 18 (within two years).

Terminating a Pension Savings Plan

You can terminate your pension savings plan by receiving a surrender value. However, this constitutes early termination of the contract, so you will forfeit the government contributions. You will, however, retain the returns on the amount you have saved. The returns and the employer’s contribution will be taxed at 15%. Additionally, if you claimed tax deductions, you will have to pay back taxes on them. You also have the option to suspend your pension savings for a limited period.

However, if you cancel your pension savings before becoming eligible for a surrender value, you will lose the returns.

Supplementary Pension Insurance vs. Supplementary Pension Savings

Let’s conclude by summarizing the main differences between the two types of savings:

• Availability: Supplementary pension insurance could only be purchased until November 30, 2012. New contracts are no longer being issued. X Supplementary pension savings can be purchased at any time (since 2013).
• Investment strategy: With supplementary pension insurance, the only available strategy is conservative, which means that investments are directed toward safe instruments. This approach minimizes the risk of loss but also significantly limits the potential for returns. X Supplemental pension savings offers multiple investment strategies, giving you the option to choose your level of risk and potential return.
• Guarantee of Positive Returns: Supplementary pension insurance guarantees that the value of investments will not fall below the amount contributed. X Supplementary pension savings do not offer this guarantee. However, they allow for higher returns but also increase the risk of loss.
• Payout Options: Supplementary pension insurance offers various options, such as a retirement pension, a survivor’s pension, or a lump-sum payment. X Supplementary pension savings do not offer a retirement pension, but they do allow for early retirement (a regular pension paid from accumulated savings up to 5 years before reaching retirement age).

There is no single universally correct choice for everyone. A conservative client may appreciate the guarantee offered by a transformed fund, while a younger person with a long investment horizon may prefer supplemental pension savings with a more dynamic strategy. The decision should therefore be based on age, income, risk tolerance, and retirement plans.

Summary

Supplementary pension insurance and supplemental pension savings are among the main ways to save for retirement in the Czech Republic with state support. Supplementary pension insurance can no longer be newly contracted, but existing contracts continue in transformed funds and typically offer a more conservative plan with a guarantee of non-negative returns. Supplementary pension savings can still be arranged today and offer more investment strategies, but also carry a higher risk. In 2026, the government contribution applies to monthly deposits of 500 Kč or more, with a maximum of 340 Kč per month for contributions of 1,700 Kč or more. In addition, you can take advantage of a tax deduction and an employer contribution. However, early termination of the contract can be costly, as you may lose the state subsidy and face additional taxation. If you are considering early retirement, a pre-retirement pension, or a lump-sum withdrawal of your savings, it’s worth comparing the legal and financial implications in advance.