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Govt Approves Amendment to Pension Law


Czech Republic

March 11, 2008

The Czech government Monday approved an amendment to the law on pension insurance that softens the indexation conditions, and so enables to index pensions more than planned this year in reaction to a steep price rise, the cabinet has announced on its website.

According to the new legislation, pensions can be exceptionally indexed if the prices rise over 5 percent, while so far a 10-percent rise has been the limit. Labour and Social Affairs Minister Petr Necas (senior ruling Civic Democrats, ODS) plans to raise monthly pensions by 465 crowns on average as from August.

The amendment is yet to be passed by parliament and signed by President Vaclav Klaus into law. Under the current law, pensions are to be indexed as of January 1. An extraordinary indexation is only possible if prices increase by 10 percent.

Prices in the Czech Republic rose by 7.5 percent year on year, which has been the highest rise in the past 10 years. Pensions were indexed by 3.9percent, while prices increased by 5.1 percent between August, 2007, and January, 2008.

Consequently, Necas proposed that pensions rise at the same pace.This measure should apply to old-age, disability and survivor's pensions.

A total of 2.7 million people draw pensions in the 10-million the Czech Republic. The government was to spend 298 billion crowns on pensions this year. The additional pension rise would cost another 6.65 billion covered from the collected pension insurance fees. The system should not end up in deficit due to this measure, Necas said previously.

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