Czech government approves pension savings reform

The Czech government has approved a legislative proposal to reform the supplementary pension savings system, with new conditions set to take effect on January 1. The reform aims to significantly increase the average amount saved by individuals by encouraging younger citizens to start saving earlier and by reducing the high fees charged by pension companies.

Key changes include doubling the state contribution for individuals under the age of 30, raising it from 20 percent to 40 percent of monthly deposits. For children and minors under 18, the minimum deposit required to qualify for a state contribution will drop from 500 CZK to 100 CZK. Additionally, young adults between the ages of 18 and 36 will be permitted to make a one-time withdrawal of up to one-third of their savings and returns without penalty.

To improve returns, the mandatory investment questionnaire will be abolished in favor of a mandatory life-cycle investment strategy. This approach will automatically shift assets from dynamic, higher-yield equity funds for younger savers to more conservative, low-risk bond funds as they approach retirement. The reform also targets pension fund fees, proposing to eliminate fees on investment returns and reduce volume-based fees from 1 percent to 0.5 percent, addressing concerns that high costs could deplete up to half of a saver's accumulated wealth over several decades.