- Hans Weber
- December 4, 2023
Government Announces Reduction in State Support for Building and Pension Savings
Prague, Czech Republic – The government has unveiled plans to cut state support for building and pension savings starting from January next year. These measures are part of a broader consolidation package aimed at addressing fiscal challenges. The proposed changes include reducing the maximum state subsidy for building savings and decreasing the contribution percentage for all savings contracts.
Under the new regulations, the maximum state subsidy for annual deposits of at least CZK 20,000 in building savings will be reduced to CZK 1,000, down from the current CZK 2,000. Additionally, the state contribution for all savings contracts, new and existing, will be lowered from ten percent to five percent of the amount saved annually. This means that individuals who save CZK 10,000 per year will receive only CZK 500 from the state, compared to the current CZK 1,000.
Furthermore, the government plans to eliminate the tax exemption on state support for building savings from income tax. While this change suggests that state support would be subject to taxation, the Ministry of Finance clarifies that the support would fall under other income and remain tax-exempt if it, together with other income, does not exceed CZK 50,000 per year.
In addition to building savings, the government is proposing changes to pension savings. The minimum deposit amount required to qualify for a state contribution will increase from CZK 300 to CZK 500, while the maximum deposit amount, above which the contribution no longer increases, will rise from CZK 1,000 to CZK 1,700. The state contribution will always be 20% of the deposited amount for deposits ranging from CZK 500 to CZK 1,700.
However, there will be some notable exceptions to these changes. People who have already started receiving an old-age pension and individuals over the age of 65 will no longer be eligible for state contributions. This alteration aims to encourage individuals to make higher monthly deposits into their pension savings accounts.
The Ministry of Finance also plans to introduce a new type of fund called the “alternative participant fund” in supplementary pension savings. This fund will have more freedom in fee policies and investment strategies, allowing for potentially higher returns but with higher investment risks.
Despite these adjustments, the tax benefits for pension savings will remain unchanged, with individuals eligible for tax savings of up to CZK 3,600 annually at a 15% tax rate.
It is important for individuals to carefully review and consider these changes to determine their impact on their personal savings strategies and financial planning. The government’s goal is to address fiscal challenges while maintaining a balance between state support and individual contributions to building and pension savings, ensuring long-term sustainability for the country’s social security system.
Article by Prague Forum