Czech Pensions Lag Behind Europe: Replacing Less Than Half of Previous Salary

The future pension of an average Czech will cover just 55.9% of their previous net salary — noticeably lower than the OECD average of 63.2%. These figures come from the Pensions at a Glance 2025 report, published last November.

This refers to the so-called replacement rate — a model calculation showing what share of an average earner's salary will be replaced by their future pension. This doesn't mean the actual average pension in Czechia equals 55.9% of the average salary — the figure simply reflects what the current pension system rules will mean for future generations of retirees.

Czechia Falls Behind Its Neighbors

By this measure, Czechia clearly lags behind a number of European countries. In the Netherlands, the replacement rate reaches 96%, in Austria it's 86.8%, and in Slovakia, 76.3%. At the same time, Czechia outperforms Germany (53.3%) and especially Poland, where the figure stands at just 40.6%.

Economist Daniel Münich from the IDEA think tank at CERGE-EI warns that such international comparisons should be treated with caution. According to him, it's often necessary to distinguish between gross and net pension amounts and the income on which contributions are paid, and differences in how various countries fund their pension systems can also distort the results of such comparisons.

The replacement rate itself says nothing about how retirees actually live in a given country: it doesn't account for the pension's purchasing power, whether people have additional income or assets, or the price level in that particular country.

The Czech System Redistributes Income

The Czech pension system significantly redistributes funds in favor of lower-income earners. For someone earning half the average salary, the net replacement rate reaches 84.4%, while for someone earning twice the average salary, it's only 40.1%.

Looking at the actual living standards of current retirees, the picture for Czechia looks considerably brighter. According to the same study, 7.6% of elderly people in Czechia live below the relative income poverty line, compared to an EU average of 14.2%. That said, income poverty is also a relative measure: the threshold is set as a certain share of a country's median income, so it doesn't give a complete picture of actual living standards.

Source: novinky.cz