Jurečka wants to discuss a permanent change in the valuation of pensions with the opposition and unions

Jurečka wants to discuss a permanent change in the valuation of pensions with the opposition and unions

Jurečka wants to discuss a permanent change in pension valuation with the opposition and trade unions< /p> Illustrative photo – Minister of Labor and Social Affairs Marian Jurečka (KDU-ČSL) at a press conference after the government meeting in Prague on December 14, 2022.

Prague – Amendment with a permanent change the government will discuss the valorization of pensions and the conditions of early retirement in a few weeks. Minister of Labor Marian Jurečka (KDU-ČSL) wants to discuss the amendments first with the opposition and also with trade unions and employers, then submit them to the cabinet. He said this at a press conference in České Budějovice during his visit to the South Bohemian Region. Department spokeswoman Eva Davidová previously told ČTK that the government could discuss the change in valuation as early as next week.

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“First, I will finish the discussions and consultations on the draft valorization mechanism and conditions for early retirement with opposition partners and representatives of trade unions and employers, then the legislative process will follow, and then in the next few weeks, after the interdepartmental comment procedure, the government would discuss it,” said Jurečka . He met with representatives of the ANO opposition movement this week. In the near future, he will have a meeting with SPD representatives, then also with trade unions and employers.

The Cabinet proposes to slow down pension growth due to indebtedness. It is also recommended by the National Budget Council (NRR) and the National Economic Council of the Government (NERV) as a step towards the necessary recovery of public finances. According to the department's plans, higher pensions should grow less and low ones should grow more. “The purpose of the proposal is to permanently treat the valorization mechanism with regard to the budgetary effects and to prevent the gap between people with low and high pensions,” said Davidová. She did not describe the individual variants.

Pensions are now valued every January by the increase in prices and half of the increase in real wages. They then increase exceptionally if the increase in prices for the monitored period exceeds five percent. So far, the government has pushed for a one-time reduction in the extraordinary valorization in June. All pensions will be increased by the same amount and only part of the increase will be based on merit. It is more advantageous for low pensions. Higher pensions will increase significantly less than under the current rules.

Czech Television reported that, according to the internal document of the Ministry of Labour, pensioners could either receive a contribution of 5,000 crowns, or only half of the price increase would be taken into account, or extraordinary pensions would not be increased and the price increase would be additionally taken into account during the normal increase in pensions in January. “It will be a mix of models,” the spokeswoman said. She pointed out that the change will follow the reduced June extraordinary valuation. Part of the addition could now be in a lump sum and less than before, it would be increased as a percentage. Money would thus be redistributed more in favor of lower pensions. It could refer to extraordinary as well as regular valorization.

Due to indebtedness, NERV recommended slowing down pension increases and increasing them again in January by a third of real wage growth instead of half. Labor Minister Marian Jurečka (KDU-ČSL) recently told ČTK that this step would be appropriate. NERV advises to limit the number of early retirements as well. Last year, 20,000 people showed interest in an earlier pension, the reason being convenience.

The pension consists of two parts. The solidarity part is the same for everyone, the years of service, contributions and the number of children are reflected in the merit amount. The solidarity part increases in January so that it corresponds to ten percent of the average salary. This year it amounts to 4040 crowns. The rest of the added amount goes to the merit part, which is increased by a set percentage. In case of extraordinary valorization, only the merit portion is raised. The amendment could partially adjust these parameters, the pension reform is supposed to bring about bigger changes.

According to experts, the Czech pension system is one of the most solidary and pensions are levelized. Some experts reject the weakening of merit and further redistribution. According to them, on the contrary, merit should be strengthened so that people have the motivation to contribute to the pension system. The Organization for Economic Cooperation and Development (OECD) also pointed out the low level of merit.

In 2017, according to the Ministry of Finance, approximately 420 billion crowns were paid out for pensions, 526 billion crowns the year before and 595 billion crowns last year. This year, the amount could be around 700 billion crowns. Expenses exceed premium income. This year's approved budget foresees a deficit of 62.5 billion crowns, without money for extraordinary valorization.