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Czech GDP share spent on pensions falling, unlike in EU

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Prague, Nov 23 (CTK) – The GDP share the Czech state spends on pensions has declined in the past five years, from 9.7 to 8.3 percent, while the trend is just the opposite elsewhere in Europe, expert Martin Potucek said on Thursday, adding that Czech politicians should set a share to go to pensions obligatorily.

Potucek heads a commission of experts and parliamentary parties’ representatives dealing with the issue of pensions, which was established by the now outgoing cabinet in 2014 and which will terminate its operation later this month.

Presenting statistic figures, Potucek told journalists that the Czech pension system is far from generous, let alone money squandering.

“We have capitalist prices but still keep socialist pensions. There is a big space for [the state to enable] pensioners to live more dignifiedly,” Potucek said.

He said it will depend on the political will and a political decision how the spending on pensions will look like in the future.

Politicians should decide on how the respective GDP share should develop. “It would facilitate the work of all pension system reformers, if the political representation said that the share will become higher than now,” he said.

Potucek rejected the objection that the state’s pay-as-you-go pension system’s account has been in deficit for many years, with expenditures higher than revenues.

He described the account as “a virtual reality” and said there is no separate account accepting people’s pension insurance contributions and distributing pensions to pensioners. Additional money flows to pensions from the state budget, which is why the pension system can never end in a deficit, Potucek pointed out.

According to the statistics, the state’s annual spending on pensions oscillated between 7.2 and 7.6 percent of GDP from 1990 to 1996, when it reached 8 percent. In 2004, the spending dropped below the 8-percent limit and remained below it until 2008.

In 2009, it reached 8.8 percent. It was the highest, 9.7 percent, in 2012, and it has been declining since.

The overall sum going to pensions has been gradually increasing, not only because of the growing number of old people but also due to the increase in pensions in consequence of rising wages.

The 2017 budget projects the spending on pensions at 406.3 billion crowns and the expected revenues from pension insurance at 386.9 billion.

According to the draft 2018 budget, the state should distribute pensions worth a total of 427.9 billion crowns and collect pension insurance worth 421.1 billion next year.

The average monthly pension stood at 11.828 crowns in late September, compared with the average gross wage of about 29,300 crowns.

Potucek’s commission recommended that the next cabinet makes the pension insurance contributions paid by self-employed people closer to those paid by employees and employers, that business companies compulsorily save money to enable early retirement of people in demanding professions, and advantages for working pensioners.

According to Potucek’s report, the present model of a commission comprised of politicians and experts did not function well.

Potucek said he believes that a population council should be established to discuss a pension reform as well as changes in the school and healthcare sectors. The council should fall under the Government Office and should be headed by the prime minister and have the status of a government concil, Potucek suggested.

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