Prague, January 19, 2023 – The Czech government has unveiled plans to introduce a new long-term investment product, the “DIP” (Depository Investment Plan), as part of its efforts to enhance retirement security and motivate citizens to actively save for their future. The DIP will be created following the revision of the third pension pillar, which will adjust state contributions to retirement savings, scheduled for implementation this January.

The primary goal of the DIP is to increase public awareness of the necessity of saving for retirement, emphasizing the inadequacy of relying solely on state pension payments. Experts and financial leaders have lauded the move, believing that the introduction of a tax-advantaged investment product will spur citizens into action.

Jan Brejl, the Managing Director of Partners Financial Group, expressed confidence that the DIP would undoubtedly raise public awareness about the pressing need to save. The initiative is poised to offer attractive alternatives to those who are dissatisfied with the predefined investment strategies of pension companies. This will empower individuals to utilize a broader range of investment tools, including stocks, bonds, shares in investment funds, and derivatives, to hedge interest or currency risks.

Finance Minister Zbyněk Stanjura hailed the DIP as a modern tool that will allow citizens to invest their savings in products with higher long-term return potential. Several financial institutions have already pledged to adopt the DIP, with Moneta Money Bank confirming its inclusion on their priority list. If the proposal passes, clients will have access to this new investment product from the beginning of next year.

While the DIP and the alternative participant fund represent positive strides towards enhancing retirement savings, Václav Podzimek, founder of the Alethes investment fund, offered a word of caution. He emphasized that greater investment freedom also demands increased responsibility, warning that inexperienced investors could incur losses due to the complexity of assessing individual investment product risks.

The proposed changes to the third pension pillar are designed to make retirement savings more appealing. In addition to the DIP, the government is considering establishing a state pension fund. This new fund, known as the alternative participant fund, will grant participants more flexibility in defining their investment strategies, enabling them to invest in potentially riskier but higher-yielding products.

In conclusion, the Czech government’s introduction of the DIP marks a significant step towards fostering a culture of active retirement saving. By providing tax-supported investment options and empowering individuals to diversify their portfolios, the government aims to strengthen citizens’ financial security during their golden years. Nonetheless, financial literacy and prudence remain crucial as individuals navigate the world of investments to ensure long-term prosperity. As the country enters this new era of retirement planning, both financial institutions and citizens must work together to make the most of these opportunities for a stable and prosperous future.

Article by Prague Forum