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Average Pension in Czech Republic Could Be CZK 20 700 from January

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Labour Minister Marian Jurečka (KDU-ČSL) announced at a press conference that the average old-age pension is expected to reach CZK 20,700 in January next year. This represents a rise of approximately CZK 400 compared to the end of this year. The increase will apply to the basic part of the pension, which is uniform for all recipients. The exact figures will be available after September 4. The minister clarified that this January increase will require approximately CZK 13 billion in the next year.

Jurečka stated, “We estimate that the average old-age pension, currently at CZK 20,200 due to the extraordinary valorization in June, will reach CZK 20,300 by year-end with the new pension rates. After September 4, we will have the precise calculation of the indexation, which will come into effect on January 1. From the data available, we expect an increase of about CZK 400, resulting in an average pension of CZK 20,700. This entire increase will be applied to the basic assessment of pensions.”

The pension consists of two components: the solidarity basic assessment, which remains the same for everyone and currently stands at CZK 4,040, and the merit percentage, which takes into account factors such as years of service, deductions from earnings, and the number of children raised.

According to the law, pensions are regularly increased in January, based on half of the increase in real wages and the rise in prices. An amendment to slow down the indexation is under consideration in the Chamber of Deputies. Pensions are expected to increase by a third of the real wage growth and the price rises for senior households as of 2018.

The proposed changes will not affect the January valorization once they are enacted, according to Tomáš Machanc, director of the ministry’s social insurance department. While earnings may not grow in real terms due to high inflation, they are increasing nominally. Statisticians will release information on wage developments in September for the second half of the year. “We can see from the collection of insurance premiums that wage growth is quite robust, so we expect an increase in the basic assessment of somewhere around CZK 400,” Machanec said.

The indexation is set to consider price increases from February to June, which amounted to 1.3 percent for pensioners’ households, according to Jurečka. The entire increase will be applied to the basic part of all old-age, disability, and survivors’ pensions to ensure it corresponds to one-tenth of the average wage. However, the merit part will not be raised this time.

At the end of the first quarter, the average old-age pension stood at CZK 19,461. It has risen by around CZK 760 since June this year. Over 2.36 million people receive old-age pensions from the social administration, while an additional 479,000 receive disability and survivors’ pensions. Several tens of thousands of pensions are paid by the systems of the defense, justice, and interior ministries, with their average old-age pensions being a few thousand higher.

Pension expenditure is increasing significantly and at a faster rate than incomes. Last year, almost CZK 600 billion was allocated to pensions, and this year the amount could be around CZK 90 billion higher. However, this year’s pension deficit is estimated to be around CZK 80 billion. With a CZK 13 billion indexation next year, over 700 billion crowns could be paid out for pensions in the upcoming year.

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