Statutory Old Age Pension Scheme
Důchodové pojištění
Coverage
Mandatory insurance
- Economically active part of the population, i.e. persons in employment relationships, employees carrying out work on the basis of an agreement on work performed outside an employment relationship and the self-employed (detailed statutory rules apply).
- Specific groups of economically active persons, i.e. judges, civil servants, parliamentary deputies, members of business corporations or cooperatives.
- Economically active participants must meet conditions for participation in the sickness insurance system (Act 187/2006 Coll.).
- Specific groups of economically inactive persons such as mothers during pre-birth and child-raising periods (up to age 4), home caregivers under the conditions stipulated in the Social Services Act (Act 108/2006 Coll.), claimants of income replacement benefits incl. recipients of sickness benefits and unemployment benefits, persons with the 3rd degree of disability.
Voluntary insurance
- Persons of at least 18 years of age who are not compulsorily insured in the statutory old age pension, such as job seekers who are not entitled to unemployment benefits, students (at secondary or higher specialised school level, university), persons performing long-term voluntary work under specified conditions, members of the European Parliament elected in the Czech Republic.
Financing
General finances
- Mainly PAYG-financed from insurance contributions.
- Partly tax-financed out of the general budget.
Contribution rates for mandatory insurance
- Fixed share of monthly gross earnings (28.0%) with contribution assessment ceiling.
- Contributions shared between the employer (21.5%) and the employee (6.5%); the self-employed contribute the same total rate themselves (28.0%).1
Contribution rates for voluntary insurance
- Fixed share (28.0%) of assessment base chosen by the participant, which must be at least 25% of the average monthly salary in the Czech Republic.
Administration
- The Czech Social Security Administration (ČSSZ) and the Ministry of Labour and Social Affairs (MPSV) manage the scheme.
Qualifying Conditions
Qualifying conditions
- Standard old age pension: statutory retirement age increases progressively to 65 until 2036 for persons born after 19712 (women’s retirement age is lowered in accordance with the number of children raised); minimum insurance period: 35 years.
- Special conditions apply to old age pensionsin case of disability (65 years of age without minimum insurance period) and for specific groups of mining workers (retirement available 7 years prior to reaching the statutory retirement age; specific conditions apply, such as commencing of work in deep mines before October 2016, spending at least 3,300 shifts in deep mines or 2,200 shifts in uranium mines, or 3,081 shifts in deep mines and 1,981 shifts in uranium mines if work was terminated due to reaching maximum permissible exposure).
- Old age pension for incomplete insurance periods: retirement age is 5 years higher than the statutory retirement age (no decreasing of the retirement age for women due to child-raising); minimum insurance period: 15 years.
Early retirement
- Available up to 3 years prior to reaching the retirement age if the statutory retirement age is below 63 years; available up to 5 years prior to reaching the retirement age if the person has reached age 60 and the statutory retirement age is at least 63 years; minimum insurance periods: 35 years (under specific conditions lowered to 30 years).
- Negative (permanent) adjustments to pension benefits apply (0.9% for every 90 calendar days if early retirement is claimed within the year before reaching the statutory retirement age; 1.2% for every 90 calendar days if early retirement is claimed more than 1 and less than 2 years prior to reaching the statutory retirement age; 1.5% for every 90 calendar days if early retirement is claimed more than 2 years prior to reaching the statutory retirement age).
Deferred retirement
- Retirement can be deferred with positive (permanent) adjustments to pension benefits (1.5% for every 90 calendar days of performing gainful activity).
Combining employment & retirement
- Termination of employment is not a precondition for claiming pension benefits.
- After reaching statutory retirement age employment is permitted without earnings limit; persons can increase pension benefits: positive (permanent) adjustments to pension benefits (1.5% for each 180 calendar days of gainful activity if receiving 50% of pension benefits or 0.4% for each 360 calendar days of performing gainful activity if receiving 100% of pension benefits).
Benefits
Pension benefits
- Primarily based on the length of insurance period and the amount of contributory earnings throughout working career.
- Maximum amount: depending on the current reduction boundaries (provided in the law) determining the levels of income and the proportion of this income taken into account for benefit calculation.
- Minimum amount: pension-tested benefit for persons with a pension below the minimum statutory pension level (CZK 3,490 in 2020); the amount of the minimum pension cannot be less than the amount of 10% of the average monthly salary in the country.
- Pension supplement: monthly supplement of CZK 1,000 for beneficiaries older than age 85 and CZK 2,000 for beneficiaries older than age 100.
Factors for benefit calculation
- Based on two main components: flat-rate basic amount and earnings-related percentage amount.
- Basic amount: flat rate, calculated as 10% of the average monthly salary in the Czech Republic.
- Percentage amount: calculated on the basis of the personal assessment base and the number of insurance periods (1.5% of the personal assessment base per year of insurance); minimum percentage amount: CZK 770.
- Personal assessment base: based on the number of insured periods and the person’s average earnings during the reference period.
- Reference period: the period beginning with the calendar year immediately following the year in which the insured person reached the age of 18 and ending with the calendar year immediately preceding the year of claiming an old age pension; calendar years before 1986 are not taken into consideration.
- Adjustments: yearly adjustment of pension value accounting for inflation and average growth in real wages.
Taxation and social security contributions
- Pension benefits are not subject to tax if the total amount of pension benefits in the calendar year does not exceed the amount of 36 times the minimum wage.
- Contributions for health insurance are covered by the state budget.
Coverage
Financing
Administration
Qualifying Conditions
Benefits
Mandatory insurance
- Economically active part of the population, i.e. persons in employment relationships, employees carrying out work on the basis of an agreement on work performed outside an employment relationship and the self-employed (detailed statutory rules apply).
- Specific groups of economically active persons, i.e. judges, civil servants, parliamentary deputies, members of business corporations or cooperatives.
- Economically active participants must meet conditions for participation in the sickness insurance system (Act 187/2006 Coll.).
- Specific groups of economically inactive persons such as mothers during pre-birth and child-raising periods (up to age 4), home caregivers under the conditions stipulated in the Social Services Act (Act 108/2006 Coll.), claimants of income replacement benefits incl. recipients of sickness benefits and unemployment benefits, persons with the 3rd degree of disability.
Voluntary insurance
- Persons of at least 18 years of age who are not compulsorily insured in the statutory old age pension, such as job seekers who are not entitled to unemployment benefits, students (at secondary or higher specialised school level, university), persons performing long-term voluntary work under specified conditions, members of the European Parliament elected in the Czech Republic.
General finances
- Mainly PAYG-financed from insurance contributions.
- Partly tax-financed out of the general budget.
Contribution rates for mandatory insurance
- Fixed share of monthly gross earnings (28.0%) with contribution assessment ceiling.
- Contributions shared between the employer (21.5%) and the employee (6.5%); the self-employed contribute the same total rate themselves (28.0%).1
Contribution rates for voluntary insurance
- Fixed share (28.0%) of assessment base chosen by the participant, which must be at least 25% of the average monthly salary in the Czech Republic.
- The Czech Social Security Administration (ČSSZ) and the Ministry of Labour and Social Affairs (MPSV) manage the scheme.
Qualifying conditions
- Standard old age pension: statutory retirement age increases progressively to 65 until 2036 for persons born after 19712 (women’s retirement age is lowered in accordance with the number of children raised); minimum insurance period: 35 years.
- Special conditions apply to old age pensionsin case of disability (65 years of age without minimum insurance period) and for specific groups of mining workers (retirement available 7 years prior to reaching the statutory retirement age; specific conditions apply, such as commencing of work in deep mines before October 2016, spending at least 3,300 shifts in deep mines or 2,200 shifts in uranium mines, or 3,081 shifts in deep mines and 1,981 shifts in uranium mines if work was terminated due to reaching maximum permissible exposure).
- Old age pension for incomplete insurance periods: retirement age is 5 years higher than the statutory retirement age (no decreasing of the retirement age for women due to child-raising); minimum insurance period: 15 years.
Early retirement
- Available up to 3 years prior to reaching the retirement age if the statutory retirement age is below 63 years; available up to 5 years prior to reaching the retirement age if the person has reached age 60 and the statutory retirement age is at least 63 years; minimum insurance periods: 35 years (under specific conditions lowered to 30 years).
- Negative (permanent) adjustments to pension benefits apply (0.9% for every 90 calendar days if early retirement is claimed within the year before reaching the statutory retirement age; 1.2% for every 90 calendar days if early retirement is claimed more than 1 and less than 2 years prior to reaching the statutory retirement age; 1.5% for every 90 calendar days if early retirement is claimed more than 2 years prior to reaching the statutory retirement age).
Deferred retirement
- Retirement can be deferred with positive (permanent) adjustments to pension benefits (1.5% for every 90 calendar days of performing gainful activity).
Combining employment & retirement
- Termination of employment is not a precondition for claiming pension benefits.
- After reaching statutory retirement age employment is permitted without earnings limit; persons can increase pension benefits: positive (permanent) adjustments to pension benefits (1.5% for each 180 calendar days of gainful activity if receiving 50% of pension benefits or 0.4% for each 360 calendar days of performing gainful activity if receiving 100% of pension benefits).
Pension benefits
- Primarily based on the length of insurance period and the amount of contributory earnings throughout working career.
- Maximum amount: depending on the current reduction boundaries (provided in the law) determining the levels of income and the proportion of this income taken into account for benefit calculation.
- Minimum amount: pension-tested benefit for persons with a pension below the minimum statutory pension level (CZK 3,490 in 2020); the amount of the minimum pension cannot be less than the amount of 10% of the average monthly salary in the country.
- Pension supplement: monthly supplement of CZK 1,000 for beneficiaries older than age 85 and CZK 2,000 for beneficiaries older than age 100.
Factors for benefit calculation
- Based on two main components: flat-rate basic amount and earnings-related percentage amount.
- Basic amount: flat rate, calculated as 10% of the average monthly salary in the Czech Republic.
- Percentage amount: calculated on the basis of the personal assessment base and the number of insurance periods (1.5% of the personal assessment base per year of insurance); minimum percentage amount: CZK 770.
- Personal assessment base: based on the number of insured periods and the person’s average earnings during the reference period.
- Reference period: the period beginning with the calendar year immediately following the year in which the insured person reached the age of 18 and ending with the calendar year immediately preceding the year of claiming an old age pension; calendar years before 1986 are not taken into consideration.
- Adjustments: yearly adjustment of pension value accounting for inflation and average growth in real wages.
Taxation and social security contributions
- Pension benefits are not subject to tax if the total amount of pension benefits in the calendar year does not exceed the amount of 36 times the minimum wage.
- Contributions for health insurance are covered by the state budget.
1 The assessment base depends on the self-employed person´s choice but must be at least 50% of the person´s tax base according to the Income Tax Act – Act 586/1992 Coll. (zákon o daních z příjmů).
2 The retirement ages of men and of women are converging due to a faster increase of the retirement age of women.
Legal Basis: Pension Insurance Act – Act 155/1995 Coll. as amended (zákon o důchodovém pojištění); Act 589/1992 Coll. as amended (zákon o pojistném na sociální zabezpečení a příspěvku na státní politiku zaměstnanosti).