News - Czech Republic

Czech Republic - May 2013

Pension reforms overview and reminder

New legislation on pension reforms came into effect on 1 January 2013. Those over 35 who wish to participate in the second ‘pillar’ have until 30 June 2013 to decide.

State Pension System

The mandatory state social security (pension) system, also referred to as "the first pillar", into which every worker and his/her employer must participate, remains unchanged with the exception of an increase in the maximum assessment base for calculating social security contributions. The main changes brought by the new legislation are the launch of the pension system’s second and third pillars.

New Second Pillar

The second pillar of the Czech pension system, also called "savings for old-age pension", allows participants of the mandatory first pillar to voluntarily apply for and participate in the second pillar and subsequently contribute to their future pension in the form of extra contributions. These contributions are remitted to and administered by a private pension institution chosen by the worker. Individuals who choose to participate in the second pillar cannot subsequently change their minds; they must participate until they reach the age to receive their pension. All individuals older than 35 years, who decide to participate in the second pillar, must apply for it by 30 June 2013 at the latest.

Supplementary Pension Savings

The third pillar of the pension system, known as "supplementary pension savings", replaces the existing system of supplementary pension insurance with state contributions. The third pillar is a completely voluntary system for all individuals older than 18. They may subscribe to a supplementary pension savings with any pension institution which has a valid licence from the Czech National Bank. Individuals participating in the third pillar system continue to remain eligible for certain tax benefits associated with contributing to this system, in particular in the form of either a tax exempt employment benefit or tax deductible item from their tax base.

For further information or to discuss any of the issues raised, please contact Mr. Jan Bürger on +420 221 430 111 at PRK Partners, Prague -


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