Study: New pension system is disadvantageous to women

Prague, Oct 4 (CTK) - Joining the "second pillar" of the pension system proposed by the government is advantageous for about one half of Czech men, but only about one-third of Czech women, daily Mlada fronta Dnes (MfD) writes Thursday, referring to a study by economists from the CERGE-EI think tank.

The government-sponsored bill introduces the "second pillar" of the pension reform enabling Czechs to send 3 percent of their pension insurance contributions to private accounts managed by pension funds, instead of the state-run pay-as-you-go system, if they add 2 percent from their own money.

In September, President Vaclav Klaus vetoed the bill, arguing that it lacks the necessary consensus of experts, politicians and in society.

The new pension system will only be financially interesting for one-third of men and one-tenth of women, MfD writes.

As a result, it will be profitable for most women to stay within the existing state pension system, it adds.

The main reason is their care for children. In the state system, the years they spend during maternal and parental leaves are calculated into the pension, although they do not contribute to the pension insurance during this period, MfD writes.

However, no savings would go to their private accounts for the time they spend at home within the new, private pension system, it adds.

Besides, it is also unknown how many people are ready to join the new system, MfD writes.

"One can presume that the real interest in the reformed system will be lower than expected by the government," CERGE-EI analyst Ondrej Schneider is quoted as saying.

Prime Minister Petr Necas reckons with one half of the working population, which means over two million people, to join the system, MfD writes.

The main reason is financial ignorance and conservatism of the Czech public, it adds.

"The effect of joining the new system would be rather low," CERGE-EI economist Jiri Satava said.

Many participants are expected to prefer the "certainty" of the state pension system, MfD writes.

However, the calculations are only valid assuming that the state pensions will be as "generous" as now, it adds.

It is unlikely that it would ever be possible to buy more goods and services for state pensions, MfD writes.

This could only happen if the state increased taxes to an even higher level than now and redistributed them to pensioners, it adds.

"Or the age at retirement will be gradually increased, the rules for early retirement will be tightened and indexation of existing pensions will be reduced," Schneider said.

The second pillar is to be introduced at the beginning of next year.

Due to Klaus's veto, the government must place the legislation on the agenda of the Chamber of Deputies again before the end of the year.