March 12 (Reuters) - The lower house of the Czech parliament
gave preliminary approval on Wednesday to a bill initiating
pension reform, needed to cope with the rising life expectancy
and low birth rate in the central European country.
The bill will now go to committees for a thorough discussion
and a final vote is expected in about two months.
The following are key points of the proposal, further
planned steps and a summary of pension reforms in other
ex-communist countries in the region.
For the main story on pensions, click on []
STEP 1:
- For the time being, the system will remain a
"pay-as-you-go" scheme where working-age people pay
contributions that are directly paid out to current pensioners.
- The bill will gradually raise the retirement age to 65 for
both men and women by 2030. Current legislation adds several
months to the retirement age every year with the aim to raise it
by 2013 to 63 for men and up to 63 for women, depending on the
number of children they have.
- The reform raises the minimum time of paying the social
insurance needed to qualify for full pension to 35 years from 25
years. The minimum time of employment will exclude years spent
in schools.
- Early retirement will be penalised by larger cuts in
pension.
STEP 2:
- Phases 2 and 3 are not part of the current legislation.
The government plans to adopt them later during its term
expiring in 2010.
- A reserve fund will be set up to finance conversion to a
fund-based pension system. The fund will receive money from
privatisation of state assets.
- Pension insurance collection and pension distribution will
be separated from the state budget.
- Government will raise incentives for private savings.
STEP 3:
- People will be given the option of a partial "opt-out"
from the pay-as-you-go system.
- Under the opt-out, people would pay lower pension
insurance and manage their own savings.
PENSIONS IN CENTRAL EUROPE
POLAND:
- Retirement age is 65 for men, 60 for women.
- The system was reformed in 1998, changing the financing to
combination of pay-as-you-go and compulsory savings. Parts of
the pension contribution are split between two or, optionally,
three pillars.
HUNGARY:
- Retirement age is 62 years for both women and men.
- A 1997 law added a mandatory private pension fund element
to the old pay-as-you-go system. The system has not been
reformed since 1997 and is expected to run into significant
financing problems by the 2020s.
- In late 2006 new rules cut the pensions of those who
retire from 2008.
SLOVAKIA:
- Retirement age is 62 both for men and women. The leftist
government has said it would not raise it, but its euro adoption
strategy paper said higher retirement age was likely in the
future to help preserve fiscal stability.
- People can choose to send half of their contributions to
private accounts, while still sending the other half to the
pay-as-you-go system.
SLOVENIA
- Slovenia introduced major pension reform in 2000 according
to which the retirement age is gradually increasing each year
until 2014, to 63 for men and 61 for women. Analysts say more
reforms are needed due to the ageing population.
- Slovenia's pension system is based on compulsory savings
but people are encouraged to combine that with additional
voluntary savings in order to boost their pensions.
(Compiled by Jan Lopatka and Petra Vodstrcilova in Prague,
Peter Laca in Bratislava, Sandor Peto in Budapest, Marja Novak
in Ljubljana and Patrycja Graczyk in Warsaw)
