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New Czech government confirms plans for funded second pillar

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  • New Czech government confirms plans for funded second pillar

CZECH REPUBLIC - The newly-elected Czech coalition government has confirmed it will continue reforms to bring about the introduction of a funded pillar to the pension system.

In July, an expert commission appointed by the previous government advocated the launch of a funded second pillar, while the European Union last month threatened to fine the Czech Republic for failing to fully implement the IORP directive.

"The newly appointed government recognised the findings of the Expert Advisory Forum in the Policy Statement of the Czech Government," the director of the Social Insurance Department, Jiri Biskup, confirmed to IPE.

He pointed out the National Economic Council, an advisory body to the new government, has also recommended the creation of a funded second pillar.

"Details on how the pillar should be created, configured and governed have not yet been specified," Biskup noted, adding that preparations were currently under way.

According to the consultancy Mercer, an unpublished report by the Labour and Social Affairs Ministry discusses the introduction of a funded pillar from January 2013.

"The scheme would be mandatory for those under age 40 on that date and voluntary for others," Mercer quotes the proposal.

Initial contributions to the pillar would be 3% of the 28% social contributions rising to 5% in following years.
 
Members would be able to choose between several fund managers with a government bond-only default fund set up for those not making a selection.

The centre-right government coalition between the Czech Civic Democrats (ODS), TOP 09 and Public Affairs (VV) came to power in July, following elections in May.

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