Pension Funds

If you’re a foreigner and you’re officially employed in the Czech Republic, whether on full-time basis or with a trade license, you will be expected to make contributions to the Czech pension system.

This might be fine if you’re expecting to live here, but what if you’re undecided, or you already know that you’re stay will be temporary, or simply you’ve been here long enough and it’s time to leave. What happens then?

According to the Ministry of Labor and Social Affairs, the Czech pension system is defined as a two-pillar system. The first and by far thickest pillar is the state pension system, which is paid into by all employed citizens and foreigners working on a full-time basis. It is termed pay-as-you-go, but rather than those funds being used for the future pensioners, as is the theory, the demands of the present pension system draw on those funds.

Those requirements are the ones given by the administration. People can choose to ignore them, but the administration warns that a fine can be incurred.

If the state system is the thicket pillar, supplementary funds represent merely a thin additional prop. They only account for 1% of pension payments.

However, if you’re interested in building a nest egg, a number of plans are available. Providing you save a certain amount of money each month, the state will pay a contribution, usually up to 150 CZK.

Click on the links below for each bank for details:

It used to be that the retirement age depended on the year you were born, and in some cases your gender, and, if you’re a woman, the number of children you have.

Then the age was equalized for all people born in 1972 to 66 years and 2 months. This limit increased by two months for every birth year, so for people born in 1977 the retirement age is 67. Those born after 1977 add two months for each birth year after 1977. E.g. if you were born in 1983, you’re retirement age would be 68. (6 x 2 months + 67 = 68).

Not quite. This calculation is for the minimum retirement age. The other factor taken into consideration is the length of time a person has been paying into the pension fund.

For people born before 2010, the period is 25 years. For people born in 2010 and after, the length of time increases by 1 year for each birth year. Therefore, people born in 2010 need to be insured for 26 years, those in 2011 need 27 years and so on up to 2018. This could affect your children unless the pension is reformed further.

The most significant reform is the introduction of a third pillar, confusingly referred to as the second pillar. At the moment, the Czech pension fund has pillars 1. (state funding) and 3. (supplementary private funds) but not 2. (a fully private fund). This is set to change next year, when a private pillar will be ushered in. People under the age of 35 will be allowed to participate freely. Those over 35 will have to decide at the beginning of next year. If they choose to, only part of their funds will be moved.

The bad news is that you’re not able to have this money returned. However, if you work for at least one year in the Czech Republic – and make one year’s worth of contribution – then work for the remaining time in a country which has a reciprocal agreement with the Czech Republic, you can claim part of the Czech pension.

To give you an example, if you work here for 10 years and then work at least an additional 15 years in the USA, thereby fulfilling the Czech requirement, you can draw on a pension calculated for this 10 year period.

Any more questions? Or maybe you have some advice of your own? Let us know in the comments section below!

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