Press Advisories

15. 12. 2010 11:42

National Economic Council's Recommendations on Pension Reform

The National Economic Council recommended that the goverment implement a new savings pillar.

The National Economic Council is counting on a start to pension reform in 2015. The National Economic Council [NERV in the Czech acronym] is recommending that the government create a new savings pillar in the form of a pension fund. People under 40 at the time pension reform begins will have to mandatorily set aside 3 % for pension insurance. All of the parameters are more or less orientational at this point and serve for calculations. The specific settings will be a matter for political agreement.

The National Economic Council also presented the government with several recommendations for preserving the current pay-as-you-go pension insurance system, which could create future deficits as high as 4 % of GDP annually. According to NERV, the current insurance rate should be decreased from 28 % to 33 %, but at the same time the value added tax levels should approach each other or be unified at 19 %. The so-called ceilings for insurance levies should be decreased to three times the average salary.

The National Economic Council also recommends that the government continue not to have the legal power to decide on pension increases above what the law allows. In the future, pensions should be increased only in connection consumer price increases. With the start of reforms, increases in the retirement age for women should also speed up, so that it would be the same as men by 2035.
According to the NERV, the start of reforms should not bring about a cancellation of the payment lifelong widowers and widowees' pensions. The original concept of this claim, according to NERV, survived, fulfils no justifiable purpose and is fiscally very costly. This measure would not be valid for pensions already granted.

NERV has also presented several recommendations in the area of disability pensions. It recommends continuing regular 10-year updates of the definition of disability. Before granting a disability pension the possibility of effective rehabilitation must always be assessed, and the quality of medical assessment services must be improved. NERV also recommends the preserving disability pension payments only to the old age pension limit; after reaching this age, they should be transferred to old age pension payments. Disability pensions should not be granted when a claim on early old age retirement has been made.

A working group dealt with pension reform inside of the National Economic Council. It was to a large extent based on the conclusions of "Bezděk's Commission." The reforms the council recommended will be the subject of further political negotiations. Their definitive form will be determined after coalition talks.

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