Pension reform
The proposed reform should change or adjust pension valorisation, make early retirement stricter, maintain newly introduced childcare allowances, increase the current relatively low contributions for sole traders and reintroduce compulsory sickness insurance paid by employees.
Some of the changes are already proposed to come into effect this year – for example, the adjustments to early pensions and the valorisation of pensions should be effective from September 2023.
The proposal also deals with the adjustment of the retirement age above the present 65 years - from 2031 it will affect people born after 1965. The boundaries will be adjusted gradually, depending on how the average life expectancy will be extended. Effective: January 2025, changes not earlier than 2031
The effect of the proposed reduction of the accumulation of APW is from January 2024 – the rules for exemption from the contributions of premiums are to be tightened (the limit for the payment of premiums will be distinguished depending on whether the employee has an APW with only one or with more employers at the same time) and the obligation of employers to report all employees working on the APW to the Czech Social Security Administration will be introduced.
Employee sickness insurance – now only the employer pays sickness insurance (2.1% of the assessment base), but newly the employee will also pay sickness insurance, at 0.6% of the assessment base. Social security premiums for employees will therefore amount to a total of 7.1% (6.5% pension insurance and 0.6% sickness insurance).
Self-employed insurance – effective from January 2024, the mandatory minimum assessment base should be increased by 5% each year from the current 25% of the average wage to the final 40% in 2026.
Last but not least, it proposes the pension reform as follows:
- gradually adapting new pensions to the ageing of society
- sharing the pension rights of spouses
- children’s education awards – parental assessment basis
- widow and widower pensions
- expanding the circle of people in demanding professions
- half of early retirement reduction after 45 years of work
- increase the guaranteed amount of pension
We will continue to monitor the pension reform approval process and keep you informed.
Article prepared by: Martina Farářová