Government Coalition Plans to Create State Pension Fund to Improve Yields and Lower Fees

The yields of domestic pension funds in the Czech Republic have remained disappointingly low for an extended period, while Czech citizens have been paying comparatively high fees to pension companies. As a result, the government coalition is now considering the establishment of a state pension fund, a proposal that aligns with the government’s program statement.

The STAN movement has put forward a plan suggesting that entry into pension savings should be automatically offered when an individual enters into an employment contract. According to Hospodářské noviny, if an employee does not actively opt out, their employer would contribute either five percent of their salary to the state fund or to a private fund of the employee’s choice.

Under this proposed system, employees would have the flexibility to withdraw from or rejoin the pension savings program at any time. Viktor Vojtko, a member of the pension commission and STAN MP, stated that the aim is to establish a public fund with minimal fees and ideally generate decent returns from relatively safe investments, thereby introducing competition into the existing pension savings system.

The Pirates, another party in the government coalition, also support the creation of a state fund.

In addition to the state pension fund, the Ministry of Finance has suggested the introduction of a long-term investment product (DIP) as an alternative to existing state-supported financial products in the market. This product would focus on providing financial security in the post-productive age.

By implementing the state pension fund as outlined in the government’s program statement, the government intends to make pension savings more appealing to individuals. The proposed measures in the third pillar, including the creation of a state fund and the introduction of a long-term investment product, will be subject to further discussion in the coming weeks.

The government hopes that these initiatives will address the persistently low yields and high fees associated with pension funds, ultimately providing Czech citizens with a more attractive and secure retirement savings option.

Article by Prague Forum

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