Czech pensions to rise by CZK 304 in January, with a one-off CZK 2,000 bonus for pensioners

The Czech Ministry of Labour and Social Affairs has proposed raising the average old-age pension from CZK 21,892 to CZK 22,196 per month — an increase of CZK 304, or 1.4%. In addition, all pensioners will receive a one-off bonus payment of CZK 2,000. The total cost to the state budget from the increase will amount to CZK 10.3 billion.

The basic component of the pension will rise equally for everyone — by CZK 270, to CZK 5,170 a month. Every pension recipient will get this amount regardless of the size of their payment. The top-up to the percentage-based part of the pension, however, depends on the individual pension amount. The government can decide to raise the total sum beyond what the law requires — which is exactly what happened with the extra CZK 2,000.

Why pensioners are getting an extra payment

Labour and Social Affairs Minister Aleš Juchelka (ANO) explained the one-off payment by pointing out that, despite the indexation, the ratio of the average pension to the average wage will still fall next year — from the current 41.9% to 40.2%, according to government calculations.

“If you look at international comparisons, it turns out Czech pensioners are worse off than in some neighbouring countries. In many states the pension replacement rate is higher than in the Czech Republic,” Juchelka said.

According to the minister, a one-off payment is a more responsible option from a budgetary point of view, since, unlike a permanent pension increase, it does not affect indexation in subsequent years.

The size of the regular annual indexation is set by law: it takes into account price growth for pensioner households and a third of real wage growth. The government approves the specific parameters by decree no later than the end of September. In the original draft state budget for 2027, the Ministry of Finance had earmarked CZK 741.5 billion for pensions — CZK 19.3 billion more than the previous year, factoring in the January indexation.

Pension insurance system moves into the black

As of the end of June, around 2.33 million people were receiving an old-age pension, with the average pension paid out independently standing at CZK 21,803.

The rise in pension spending is driven primarily by the ageing of the Czech population. Nevertheless, according to the Ministry of Labour’s estimate, the pension insurance system will post a surplus this year — of around CZK 10 billion — for the first time in a long while. Last year the system ended with a deficit of CZK 9.2 billion, and the last time it closed a full year in surplus was back in 2018–2019, before the pandemic.

Despite this, total pension spending continues to grow and, according to economists, will keep rising further due to regular indexation and an ageing society.

Besides the January indexation, pensioners may also be affected by another change currently in the works: people who turn 80 could receive an extra CZK 500 every five years. Currently, pensions are increased by CZK 1,000 upon reaching age 85, and by a further CZK 2,000 upon reaching age 100.

Source: novinky.cz