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Czech second-pillar pension system to close by January 2016

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  • Prague, Czech Republic

The Czech three-party coalition government has announced that the voluntary second-pillar pension system will be eliminated by January 2016, rather than a year later.

The decision for the earlier date was spearheaded by prime minister Bohuslav Sobotka and his Social Democrat (CSSD) ministers and backed by those from the Christian Democratic Party (KDU-CSL).

Sobotka explained to the press that the system was not beneficial for most Czech workers and had attracted relatively few members.

Finance minister and deputy prime minister Andrej Babiš and his ANO 2011 party ministers unsuccessfully argued for the later date because of potential legal challenges from the 84,000-odd members of the second pillar, and the five providers who had set up 20 so-called ‘retirement funds’.

The second pillar was introduced in January 2013 by the previous government, which then lost the general election the following October.

Sobotka’s pre-election warnings that his party would scrap the system if it won undoubtedly contributed to the low take-up, and with some providers in the long-standing third pillar declining to participate.

The second pillar is funded by diverting 3% of the 28% first-pillar social security contribution, alongside an additional 2% of members’ gross wages.

Under the liquidation scheme, recommended by a cross-party working group appointed earlier this year, second-pillar members will be able to choose whether to receive their funds into private bank accounts, with the option of returning the 3% portion back into the first pillar, or reinvest them into existing third-pillar funds.

Labour and Social Affairs minister Michaela Marksová, a CSSD member, had earlier argued for the 3% portion to be compulsorily returned to the first pillar.

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