Who has to pay pension insurance and what is it good for?

JUDr. Ondřej Preuss, Ph.D.
20. October 2025
8 minutes of reading
8 minutes of reading
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Everyone who works or runs a business comes across pension insurance – usually without realising how crucial it is to their future financial security. Pension insurance is the main source of funds from which the state pays pensions to people who are no longer active in the labour market. And while it may seem that ‘someone else’ is looking after our contributions, it pays to understand exactly how the system works, who contributes, how the pension is determined and how to check that we have all the correct years of service.

What is pension insurance and why does it exist

Pension insurance is a key element of the social system in the Czech Republic. It is a compulsory system of financial contributions that pay pension benefits – mainly old-age pensions, but also disability and survivors’ (widow’s, widower’s and orphan’s) pensions. The purpose of insurance is to provide people with an income when they can no longer work or are no longer allowed to work, mainly because of age or health.

The basic principle of the system is intergenerational solidarity. Those who are economically active today contribute funds from which the state pays pensions to current seniors. In return, when they themselves reach retirement age, their pensions will be covered by the contributions of younger generations. This mechanism is often referred to as a pay-as-you-go system. It is therefore not a personal savings account, but a collective provision whose stability is based on the number of insured persons, employment and wage growth.

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Pension Insurance Act

The rules of pension insurance are defined by the Pension Insurance Act, which has been in force since the mid-1990s but is regularly amended and adapted to economic and demographic conditions. The law determines who participates in pension insurance, what benefits are provided and under what conditions. It is also followed by the Act on the Organisation and Implementation of Social Security, which deals with technical and administrative issues such as the registration of insurance periods or the maintenance of personal accounts with the Czech Social Security Administration(CSSA).

Under this law, pension insurance is divided into three main areas:

  1. Old-age insurance – provides income after retirement age.
  2. Disability insurance – provides a benefit to persons who have lost the ability to engage in gainful activity due to a long-term adverse health condition.
  3. Survivors’ insurance – provides pensions to widows, widowers and orphans of a deceased insured person.

Thanks to this system, the state protects citizens in situations where they cannot earn their own income. At the same time, however, the law clearly stipulates that certain conditions must be met in order to qualify for a pension – in particular, a sufficient period of participation in insurance.

Who must participate in the pension insurance scheme

Pension insurance is compulsory for all employees for whom the employer pays the contributions and for self-employed persons (self-employed persons) who pay their own contributions. Participation begins on the date on which a person starts to work and ends on the date on which he or she stops working.

In addition to the compulsory participants, there are also groups of persons for whom pension insurance is paid by the State. These include:

The state thus ensures that people not in active employment do not lose the necessary period of insurance.

A special group are voluntary insurers who pay for their own insurance – typically people between jobs, abroad or those who are a few years short of their pension entitlement. Voluntary insurance can be arranged directly with the CSSA and can be paid up to 10 years in arrears.

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Tip: The retirement age is still rising. At the same time, however, this is not the only factor at play. When you can retire also depends on when you pay your pension. Find out what conditions apply to you.

Period of insurance for pension – why it is so important

The period of insurance is the total number of years a person has been covered by a pension scheme. It is this period that determines whether you are entitled to a pension at all. For an old-age pension, you currently need at least 35 years of participation in the insurance scheme, including so-called replacement periods.

The replacement periods include, for example:

  • caring for a child up to the age of 4,
  • registration with the employment office,
  • studying (until 2010),
  • military service,
  • receiving a disability pension.

At the same time, the law also takes into account situations where someone does not meet the full period of insurance. In such a case, a person may be entitled to a pro rata share of the pension if he or she has been insured for at least 15 years and has reached a higher age.

Each year of insurance increases the amount of the future pension. It is therefore also important to make sure that all the years of service and contributions paid are correctly recorded in the system.

How to find out your insurance period and check your details

Records of insurance periods are kept by the Czech Social Security Administration, which collects data on all contributions, employers and breaks in insurance. Every citizen can check for free whether all the data are correctly recorded. The easiest way is to use the ePortal of the Czech Social Security Agency, where a complete overview is displayed after logging in via the Citizen’s Identity.

If you find discrepancies, such as missing periods or employers, it is advisable to resolve them as soon as possible. You can request a correction of the records and support the missing data with pay slips, employer’s confirmation or bank statements. These details can make a big difference to whether and how much pension you get in the future.

How a pension is calculated and how it relates to insurance

The amount of your pension is based on two main factors: the length of time you have been insured and the assessment bases, i.e. the average earnings on which contributions have been paid. The longer a person has worked and the higher their earnings, the higher their pension tends to be. However, the system is set up to protect those on lower incomes – there is a solidarity component that provides a minimum pension for all those who meet the conditions.

The calculation is quite complex and changes regularly in line with indexation. In general, however, each additional year of work and higher contributions pays off. Therefore, even people who work only occasionally or have intermittent employment should consider making voluntary contributions.

Tip for article

Tip: We all know that years spent working count towards retirement. But what if you spent part of your productive years on parental leave, on long-term disability, or in college? Find out what counts as years of service.

Pension insurance as the first pillar of the system

Pension insurance is the first pillar of the pension system. It is often supplemented by other forms of savings, such as supplementary pension savings or life insurance, to help bridge the gap between working-age and retirement income. But the first pillar remains irreplaceable – it is compulsory and state-funded.

It provides every citizen with the security of at least a basic income in old age. At the same time, people are expected to approach the system responsibly – to keep track of their contributions, insurance periods and to think about long-term security.

Summary

Everyone who works or runs a business is obliged to participate in pension insurance, which forms the basic pillar of the Czech social system. From these contributions, the state pays old-age, disability and survivors’ pensions, providing financial security for people who can no longer work. Pension insurance works on the principle of intergenerational solidarity – current workers contribute to the pensions of today’s seniors, while in the future the contributions of younger generations will also finance their own pensions. The Pension Insurance Act sets out who is compulsorily insured, what benefits are due and what conditions must be met. The insurance applies to employees, for whom the employer pays the contributions, and to self-employed persons (self-employed persons), who pay their own contributions. The state also contributes on behalf of certain groups of people – for example, parents on maternity leave, carers, jobseekers or disabled pensioners – so that they do not lose the necessary period of insurance. You are entitled to an old-age pension when you reach retirement age and have at least 35 years of insurance, including so-called replacement periods such as childcare, registration with the labour office, military service or study until 2010. Each year of insurance increases the amount of your pension, so it is important to check the accuracy of the Czech Social Security Administration’s records. The amount of the pension depends on the length of insurance and the amount of earnings on which the insurance premiums are paid. Pension insurance is thus a compulsory, state-run system that guarantees a basic income for old age and is supplemented by voluntary savings in other pillars.

Frequently Asked Questions

When do I have to pay my own pension?

If you are not employed or self-employed and the state does not pay for you, you can sign up for voluntary insurance. This is typically used by people working abroad, people on unpaid leave or those who are a few years away from retirement.

How long do I have to be insured to qualify for a pension?

For a full old-age pension, you need at least 35 years of participation. This includes compensatory periods, such as childcare or registration with the labour office.

Can I make up the missing years retroactively?

Yes, but only to a limited extent – a maximum of 10 years backwards. The Social Security Agency always assesses whether the extra payment covers a period that can be recognised under the law.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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