Czech welfare tax could go to voluntary funds

CZECH REPUBLIC ­ - Labour and Social Affairs Minister Petr Necas is seeking pension reforms which would allow employees to re-direct part of their national insurance contributions into voluntary pension funds.
The ministry has proposed part of the final stage of the country's pension reforms would be to allow Czech workers to put up to 4% of the national insurance contribution into private peansion plans. The joint employer and employee contribution rate is currently 28%.
However, the suggestion outlined in the government agenda does not have full backing from all coalition partners. Necas' Civic Democrats (ODS) party are currently forming a government with the Christian Democrats (KDU-CSL) and the Greens (SZ).
Opposition parties have rejected the proposal arguing it will weaken the funding of the first pillar and only people with a higher income will make use of it.
"Nobody knows if this will really happen and when," Jiri Rusnok, president of the Czech Association of Pension Funds and pension director at ING for the Czech Republic and Slovakia, told IPE.
He added he was sceptical because of the reaction of some of the politicians and because of the timing.
"Necas said he wants to try and convince the other parties in the coalition and in the opposition to finalise the legislation in 2009," Rusnok explained.
"This means that the proposal would pass parliament one year or even only half a year before the elections in 2010. And this would be very unusual," he added.

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