Sections

Czechs ‘need parametric pension reform’

CZECH REPUBLIC – The Czech Republic needs to implement a parametric pension reform and raise the retirement age, according to the International Monetary Fund.

The measures are among a set of moves the IMF suggests to help the country grapple with one of the most rapidly ageing populations in Europe.

The fund says existing political parties’ existing proposals are not sufficient to ensure the sustainability of the pension system.

“More far-reaching reforms in the public pension system are needed,” the Washington-based IMF stated. “Even if the new pension model envisages a shift to private funded pensions, existing retirement incentives need to be reviewed, as there are indications that the existing pension system provisions can discourage continuing labor market participation.”

And it said the “weak link” between contributions and benefits needed to be addressed. And pension benefit reform and fiscal consolidation would also be needed to create reserves for pre-financing pension system deficits or transition deficits.

“Early implementation of these reforms will help reduce welfare costs over the long run and lower the burden on the young.”

The IMF recommends increasing statutory retirement age with accompanying measures to ensure that the effective retirement age also rises.

And it calls for prefunding reserves for pension deficits through fiscal consolidation measures. It says further retirement savings incentives should be postponed “until a cost-benefit analysis of the existing incentives is undertaken”.

The parametric reform would “reduce the implicit pension debt and increase the rate of return of the pension system by strengthening the link between contributions and benefits”.

It said: “These measures need to be implemented irrespective of the choice of the new model adopted, as they will help facilitate the transition to the new system, while lowering fiscal and welfare costs of aging.”

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2467

    Asset class: Search for a broker (mainly ETFs).
    Asset region: Global.
    Size: 250m.
    Closing date: 2018-08-28.

  • DS-2468

    Closing date: 2018-08-24.

Begin Your Search Here