Czech pension reform cuts future pension calculations

A new pension reform law (No. 417/2024) in the Czech Republic will gradually lower the basis used to calculate future pensions. Starting in 2026, the earnings component of the pension formula will be reduced each year by 1 percentage point, moving from a 100 percent credit to a target of 90 percent by 2035. At the same time, the coefficient applied to each year of insurance will be lowered from 1.5 percent to 1.45 percent. These measures run alongside a rise in nominal pension amounts due to regular indexation, but they will cause the pension share of average wages to fall over the transition period.

The reform was approved by the lower house on 8 November 2024 despite opposition from the ANO and SPD parties, which voted against the bill and called it an “asocial step”. The opposition’s proposed amendments to eliminate the reductions were rejected by the governing majority. The current administration has indicated no plans to reverse the mechanism, and the Social Democratic Party (SPD) has stated it will revisit the issue after addressing other coalition priorities.

The changes are expected to affect retirees beginning in 2026 and will continue through 2035, altering the projected pension income for future generations of Czech seniors.