Czech Government Delays Change to Pension Indexation Formula — Finance Ministry Demands More Precise Impact Assessment

The Czech government has postponed its promised change to the pension indexation formula, pushing it into a future amendment to the law. The delay came after the Ministry of Finance objected to a hasty decision, insisting on a more transparent and systematic assessment of the reform's consequences. The news was reported by the Czech Ministry of Labour.

Currently, the insurance component of old-age, disability and survivor's pensions is indexed to inflation plus one-third of real wage growth. Upon taking power, the ANO, SPD and Motorists coalition promised to restore the previous formula — inflation plus half of real wage growth — as it was before the previous government changed it.

The Ministry of Labour and Social Affairs had even included this provision in a draft bill. However, the Ministry of Finance, led by Alena Schillerová (ANO), pushed back. "We insist that the change to the valorisation formula be addressed together with the issue of hazardous occupations and other comprehensive changes within a single amendment, which would ensure a more transparent and systematic assessment of the consequences," the ministry stated in its comments on the bill.

The Ministry of Labour agreed to this demand. Asked about the reasons for the delay, the ministry had not responded by the time of publication. Earlier, Labour Minister Aleš Juchelka (ANO) told another outlet that the decision followed discussions with the Finance Ministry, which insisted on its position.

"Changing the valorisation formula remains an important part of my agenda," Juchelka said, noting that postponing the measure to a future amendment would not affect next year's pension indexation. This is because real wages fell in 2022 and 2023 due to inflation and will only exceed 2021 levels next year or the year after. Only then will real wage growth begin to factor into the indexation formula.

This is not the only item in the government's pension system plans being pushed to a future amendment. Also delayed is the reinstatement of a cap on the minimum retirement age at 65 — under current law, it is set to gradually rise to 67.

"This should happen in the second wave," the minister said earlier. According to the legislative work plan, the next amendment to the pension insurance law will be presented to the government in the second quarter of next year and is expected to take effect in January 2028.

More Money for Working Pensioners

On Monday, the government will consider, among other things, improvements for working pensioners as part of the current amendment. It plans to reinstate a pension bonus for each additional year worked.

This system was in place until the end of 2024: pensions rose by 0.4% for every 360 days of employment. Since January 2025, this bonus has been replaced by a social insurance discount, which boosts working pensioners' net pay instead.

Under the new proposal, the insurance discount would remain in place, while the percentage component of the pension would also rise by 1.5% for each year worked.

The situation will also improve for pensioners over 80: every five years, their pensions will additionally rise by 500 crowns a month, and by a thousand crowns upon reaching age 100. Currently, pensions increase by a thousand crowns a month at age 85 and by two thousand crowns at age 100.

Around Prague, based on reporting by novinky.cz