Czech Government Delivers on Pension Promises, but Economists Warn of Budget Risks

The Czech government has begun making good on pre-election promises to pensioners: seniors who previously terminated their supplementary pension savings contracts — and as a result lost state contributions or their own payments — will now receive compensation. Finance Minister Alena Schillerová (ANO) said the measure will cost the state budget roughly 60 million crowns.

The compensation will apply to older people who saved for less than five years and signed their contracts no later than December 2023. "I consider this a sound investment in restoring trust in the fair and predictable conduct of the state," Schillerová said.

The cabinet is preparing further changes as well. Bills raising pensions for working pensioners and adjusting pension valorisation for people over 80 have already been submitted to the Chamber of Deputies.

According to calculations, raising pensions for working seniors who already benefit from social insurance relief will alone cost nearly one billion crowns in 2027. By 2060, that figure is projected to climb to 54.4 billion crowns, while tax revenue from this group of citizens will amount to only around one billion crowns.

"The push to keep pensioners in the labour market is understandable. But there's no analysis showing that this measure will actually achieve that," says Dominik Rusinko, chief economist at Patria Finance. He argues that such a significant increase in spending looks unwise given the already strained state budget.

State spending on pensions has been rising for years and now accounts for roughly a third of all state budget expenditure — about 740 billion crowns this year. Meanwhile, demographic forecasts from the Czech Statistical Office suggest the number of people over 80 will only keep growing.

"State budgets will come under enormous pressure and will be forced to look for revenue by raising taxes," warns economist Filip Pertold from the CERGE-EI research institute.

Source: novinky.cz