Czech Republic Raises Retirement Age, Cuts Benefits

The Czech government approved changes to the country's pension system on Tuesday, raising retirement ages and lowering pensions for future retirees as it aims to save the system billions of dollars per year.

The reform builds in gradual shifts in the retirement age, delaying retirement by seven months for people who are now 52, compared to the current retirement age of 65, according to plans. It also lowers pensions calculated for future retirees by about 8% compared with the current formula.

Czech pensions, funded from current contributions of workers and entrepreneurs, got a bump from automatic increases triggered by double-digit inflation in 2022 and 2023, raising their value versus average wages.

The central European country, like many others in the developed world, faces fiscal pressure from ageing populations due to higher life expectancy and low birth rates.

"(The changes) will prevent a collapse of the pension system and secure dignified pensions for today's young generation," Prime Minister Petr Fiala said.

Understanding the Retirement Age Shift

• Gradual Increase:  The retirement age won't remain at 65. It will rise gradually, eventually reaching a peak likely around 65 for everyone. This increase is tied to rising life expectancy.
• Adapting to Longevity: The system aims to keep people in retirement for roughly 21 years on average. As lifespans change, so will the retirement age.
• Birth Year Matters:  Your exact retirement age is heavily influenced by your year of birth.  Those born earlier will retire sooner than those born later.

Continued Debate

The centre-right cabinet's reform also allows for earlier retirement for people working in physically demanding or risky professions, such as forestry workers, firemen, miners, welders or specialized nurses.

The government has enough votes to push the legislation through but the current opposition, led by the populist ANO party of ex-prime minister Andrej Babis, is likely to make the reform a campaigning tool ahead of parliamentary elections due in the autumn of 2025.

ANO dodged attempts at cross-party agreement on pension changes, moderated by President Petr Pavel. This means the reform is likely to face stiff opposition in parliament where it is expected to go in the coming months.