- Hans Weber
- December 7, 2023
Czech Chamber of Deputies Approves Proposal to Slow Pension Adjustments and Tighten Early Retirement Conditions
In a significant development, the Czech Chamber of Deputies has given its approval to a government proposal aimed at slowing down regular pension adjustments and imposing stricter conditions for early retirement. Despite threats of obstruction from the opposition, the bill was ultimately passed after more than 13 hours of debate. The proposal will now be reviewed by the Social Affairs Committee, with a half-month deadline set for its discussion.
Minister of Labor and Social Affairs, Marian Jurečka, defended the proposal, stating, “We are taking steps that will lead to stabilization so that future pensions have a decent level and value.” The Ministry believes that the slowdown in pension adjustments and the tightening of conditions for early retirement will help mitigate the decline in the pension system and reduce debt.
“We prioritize the sustainable management of the Czech Republic,” emphasized Prime Minister Petr Fiala. As per the legislation, the government aims to make decisions regarding pension adjustments for the following year as early as September.
However, the opposition has expressed disagreement with the proposed bill. Alena Schillerová, head of the parliamentary club of the ANO party, criticized the proposal, stating, “The main and only goal is to reduce the standard of living of pensioners.” She further described the proposal as senseless and antisocial. Tomio Okamura, head of the SPD party, added, “These are changes that will significantly harm all current and future pension recipients.”
Initially, opposition representatives threatened to obstruct the proposal until the weekend. The debate continued for over 13 hours and concluded early Friday morning, with the bill receiving support from 60 opposition deputies and facing opposition from 82 coalition representatives out of the 142 present deputies.
Under the current system, pensions are regularly increased every January, growing based on the growth of prices and half the growth of real wages. However, starting from next year, the increase will be linked only to the development of costs for pensioner households and one-third of the growth of real wages, as was the case prior to 2018.
The proposed changes also include tighter conditions for early retirement, limiting it to a maximum of three years before the retirement age, compared to the current five-year threshold. Individuals who have worked and paid contributions for 40 years will be eligible for early retirement, whereas previously it was 35 years.
However, early retirement will come with disadvantages, as the amount received will be subject to more substantial cuts than before. Pensions consist of two parts: a solidarity introductory exchange rate, which remains the same for everyone, and a merit percentage based on years worked, contributions from earnings, and the number of children. Under the proposed bill, the merit part would not be valued for early retirement until the regular due date.
If prices increase by at least five percent since the last adjustment, pensioners will receive additional funds, similar to the current extraordinary valorization. They will receive a temporary supplement, and the merit part of the pension will also be temporarily increased. The increased percentage exchange rate and the temporary supplement will reflect 60 percent of the rise in prices.
As the proposal moves forward for further review and discussion, its potential impact on pensioners and the pension system as a whole remains a subject of debate and concern.
Article by Prague Forum
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- Hans Weber
- December 7, 2023