Pension reform passes: What does it mean for your retirement age and payments?

On Friday, the Chamber of Deputies finally approved a sweeping pension reform law that will affect when people in Czechia can retire and how much they’ll receive.

According to the new law, the retirement age will increase by one month per year for those born after 1965. For instance, individuals born in 1971 will retire at 65 years and six months, while those born in 1977 will retire at 66 years old. The ceiling will be reached in 2056, with people born in 1989 and later retiring at 67 years old.

Payments will also be hit. While the average pension is expected to go up by CZK 62 (totaling CZK 355 for the average senior), the rate of increase will slow down between 2026 and 2036. This means the difference between pensions might be smaller than initially planned.

Despite this slowdown, average pensions are expected to rise from CZK 20,700 in 2024 to CZK 30,700 by 2034.

The proposed change will impact the second part of pension payments, raising it by only 2.3 percent instead of the originally planned 11.5 percent. This means that individuals who have chosen pension insurance could see a smaller increase in their future pension payments.

"This reform is a necessary step to ensure the long-term sustainability of our pension system," said a spokesperson for the Ministry of Labor and Social Affairs. "By gradually increasing the retirement age, we can ensure that our seniors continue to receive a dignified pension."

Demanding professions, such as those exposed to great heat, cold, vibrations, or physical load, will have to wait for a separate law to address their early retirement options. Employers will contribute 4 percent of their gross salary to private pension insurance, which can be used to fund pre-retirement.

Caregivers will also benefit from the reform, with a new family assessment basis that will appreciate their efforts in caring for sick family members. The assessment will be calculated as if they were receiving an average wage during the care period, and their actual earnings will be added to the assessment base if they continue to work.

The reform also brings changes to pensions for working seniors, who will see their social insurance rate drop by 6.5 percent, resulting in higher earnings. Partners will be able to split their assessment bases in half, and the minimum pension will increase to 20 percent of the average wage.

While the reform may seem complex, its ultimate goal is to ensure a sustainable pension system for generations to come. As the Czech population ages, the state says that this reform is a crucial step towards securing a dignified retirement for all citizens. The Czech Senate still needs to approve the reform, which President Petr Pavel will then sign—he expressed his support last week.