Reform needed to combat crisis
The Czech Republic needs to implement a parametric pension reform and raise the retirement age, according to the IMF. 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 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 states. “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 labour market participation.”
And it says 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 pre-funding 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 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”.