Prague, Nov 8 (CTK) – The lower house of Czech parliament has passed a bill that should make savings in private pension funds, or the third pillar of the pension system, more attractive and the upper house will be discussing the bill now.
People will not have to pay taxes from up to 24,000 crowns they sent to the third pillar every year, while now the maximum limit is 12,000 crowns a year. The minimum age limit for joining the pension saving scheme was 18 years, while youths may join it as well according to the new bill.
If the old age pension is paid out over a period of more than 10 years, no taxes will be imposed on the sums. Until now, only the first pillar was exempt from taxation.
Employers will not pay taxes from up to 50,000 crowns a year sent to an insurance or pension savings account of an employee. At present, it was up to 30,000 crowns a year.
The pension may be paid out to people who reached the age of 60 years, while now it is 65 years.
This bill, which the lower house passed on Friday, accompanies the bill on the abolition of the second pillar of the pension system, which was passed by the lower house last month.
The second pillar of the pension system was introduced by the previous right-wing government in 2013. The opposition Social Democrats (CSSD) then promised that they would scrap the second pillar as soon as they head the government, which they did in early 2014.
Within the second pillar, people could send 3 percent of their compulsory pension insurance contributions, which otherwise go to the state pay-as-you-go pension system (first pillar), to private pension funds if they added another 2 percent from their own money.
The second pillar will be completely abolished by July 2016. Also due to the uncertainty caused by the political disputes, only 291,000 people joined the third pillar. These people will not lose any of their savings. They will be able to receive them or move them to the third pillar.
More than 4.4 million people save money within the third pillar in the country with 10.5 million inhabitants.
Ales Poklop, head of the Association of Pension Companies, told CTK that the bill would make the third pillar much more attractive. “The lower house decision is excellent news,” he said.
Ales Tuma, analyst of the Partners Financial Services company, shared the view that the changes were positive and made the pension savings more attractive.
Tuma said he did not expect the changes to cause a revolution in pension savings because a large number of people regularly sent only small sums to their pension accounts. “The higher tax alleviation will not cost the state coffers so much for this reason, but it is an appealing gesture,” he said.
Analyst Anezka Kneeova, from the Swiss Life company, said she did not consider the higher tax deductions very effective. Only people with higher incomes will use this advantage, she said.
Kneeova said an increase in the state contributions to the pension savings would help much more.
The Chamber of Deputies also increased the regulated commission for the signing of a pension savings contract paid to agents, as part of the bill. The fees paid to the private pension funds for administering the pension account will slightly increase, too.