Senior couple close up. holding each others hands on the cane

Rakusan: Coalition Parties Have Differing Views On Controversial Proposed Pension Rise

The government’s National Economic Council (NERV) has recommended slowing the pace of planned pension indexation in order to address the national debt. Photo credit: Freepik.

Prague, March 19 (CTK) – Each of the government coalition parties has a different proposal for how to slow down the planned future pension increase, Czech Interior Minister Vit Rakusan (STAN) said in a discussion on Prima TV yesterday.

He said a compromise must be found that would also be acceptable for the opposition, so they would not cancel it in the future if they won the next elections.

The government’s National Economic Council (NERV) has recommended slowing the pace of planned pension indexation in order to address the national debt.

Labour Minister Marian Jurecka (KDU-CSL) said the government would debate a bill proposing a new model of the pension increase in several weeks.

Rakusan said that each party in the government coalition wanted a slightly different pattern, and it was necessary to find a compromise that would be acceptable for the opposition as well. He also called on the opposition to meet and discuss the matter with coalition representatives.

By law, pensions are indexed in the Czech Republic each January, raised in connection with the rise in prices and a half of the real wage growth. Extraordinary pension indexation is applied if the price rise for a certain period exceeds 5%.

Neither Rakusan nor Jurecka would elaborate on the specific proposals of their parties. Jurecka said on Friday that he wanted to discuss it with the opposition, trade unions and employers in the coming weeks.

NERV has proposed for pensions to be increased by one-third of the rise in real wages, as before.

Recently, Czech Television reported that the Labour and Social Affairs Ministry has come up with a new proposal for the further curbing of pensions. One of its draft proposals would see all pensioners receiving a one-off sum of CZK 5,000 within the extraordinary pension indexation, in reaction to high inflation. Per another proposal, extraordinary indexation would be abolished and the state would compensate pensioners for inflation within the regular January indexation. The third proposal is to lower the extraordinary indexation of pension to just half of the growth in inflation, compared with the current indexation which encompasses the rise in inflation in full.

Based on the budget that has already been passed and signed, this year’s spending on pensions will exceed the income from insurance by CZK 62.5 billion. However, this sum does not take into account the June extraordinary indexation, which will cost the state CZK 19 billion less than previously envisaged (CZK 15.4 billion instead of CZK 34.4 billion).

Lowering the extraordinary pension indexation would reduce the growth of state expenditures by roughly CZK 250 billion by 2030, according to the Czech Fiscal Council.

Based on the amendment, the average monthly pension is supposed to grow by CZK 760 in June instead of CZK 1,770 as previously planned. The merit part of all pensions will rise by 2.3%, instead of 11.5%, as of June, and by an additional CZK 400. This proposal is more advantageous for those with the lowest pensions.

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