Starting from next July, individuals with old-age pensions in the Czech Republic will no longer receive state contributions to their pension savings, potentially impacting up to a million seniors. Additionally, approximately a quarter of a million of these seniors face a concerning dilemma—they risk losing state contributions granted, amounting to thousands of crowns, and potentially losing all their savings if they choose to leave the unfavorable pension system.

The critical condition for a one-time settlement from pension savings, which will no longer be met as of July 1, is reaching the age of 60 and having a minimum of five years of savings. Ales Poklop, president of the Association of Pension Companies, warns that a quarter of a million pensioners will not meet this condition. If they opt to exit the system, they will receive only a dismissal, with the state reclaiming all contributions granted during their savings period.

Moreover, these individuals would be required to repay any tax reliefs they had received. The situation is particularly dire for those who have not even saved for two years, estimated to be around 80,000 pensioners in July 2024. Poklop highlights that when terminating contracts shorter than two years, participants will receive nothing, not even their own money already invested in pension savings.

Poklop is urging lawmakers to reconsider the stringent conditions, proposing a fair solution with the introduction of a five-year grace period. This would allow individuals with existing contracts to continue saving under the initially agreed-upon conditions.

The impending changes are part of an amendment that adjusts state contributions to pension savings, already approved by the chamber and set to be discussed by the Senate. While some advocate for a five-year postponement of the change, opinions on the feasibility of such adjustments remain divided among stakeholders.

Article by Prague Forum