Petr Pavel signed the pension amendment

2023-09-01 13:56:00

Despite reservations, President Pavel signed the pension amendment. The rules for early retirement are therefore expected to be tightened and the valorization of pensions to slow down.

The amendment regulates the extraordinary valorization of pensions in a way that would lead to a more expensive solution than the current one in the event of another inflationary fluctuation. Pavel stated. A temporary addition would replace the current extraordinary valorization in the event of higher price growth.

Pavel considers the sudden shortening of the possible early retirement from five to three years before the standard retirement age to be problematic. However, as a whole, according to the president, the amendment goes in the right direction, which is why he signed it.

He communicated his reservations personally to Fial and to the Minister of Labor and Social Affairs, Marian Jureček (KDU-ČSL). At the same time, he generally appealed to respect the deadline for the assessment of laws given by the constitution.

According to the proponents, the adjustments are intended to contribute to the long-term sustainability of the pension system and to reducing the state’s debt.

Both Fiala and Jurečka welcome the decision

“It’s good that Mr. President listened to my arguments and signed the law after our discussion, which corrects inequities in the pension system and helps to restore public finances. I am convinced that we are acting responsibly for the benefit of Czech citizens and their good future,” said Fiala. Jureček also welcomed the president’s approval.

Political scientist: It is not fair to keep the beaver silent

Petr Pavel hesitated for a long time to sign the amendment, which caused reactions on the X network and in the government coalition. “It’s not fair when the Castle keeps the beaver silent for so long about the pension changes and strains Fial’s government as well. Even the president’s speech should be clear – yes, yes, no, no. In addition, I hope that P. Pavel will not take over Klaus’s bad habit of not signing or vetting laws,” responded political scientist Lukáš Jelínek before the president signed the amendment.

“If the president vetoed the law on extraordinary valorization due to doubts about compliance with the Constitution, I wouldn’t even give a damn. But this is purely government budget policy, and the president should not interfere with it. One way or another, his hesitation will cost us a lot,” said former finance minister Miroslav Kalousek about the unclear situation. “So now it’s at least 4 billion,” he then wrote in the comments to one user.

“However, Bezděk is right (Vladimir Bezděk, Pavlo’s advisor, editor’s note) (…) The replacement of extraordinary valorizations paradoxically makes the whole system more expensive – extraordinary valorizations save by only increasing the percentage component in the interim, and the next regular valorization follows on from a lower base.” sociologist Daniel Prokop opposed him.

Economist Vladimír Bezděk said on Czech television that the amendment affects people in their sixties who would already be preparing for early retirement. The departure would suddenly be delayed for them. “It is too sudden and sharp intervention in pension rights, there is no transitional mechanism,” the president’s adviser said.

“That number (4 billion crowns, editor’s note) is nonsense. According to real wages, it will not be valorized for many more years, and there will probably not be an extraordinary valorization this year.” wrote on X economist Filip Pertold. “If the president does not sign the amendment, nothing will probably happen in terms of valuations. The extraordinary valuation will not take place until the end of the year, and the regular one will only reflect inflation, not the real wage. According to the real wage, it will be valorized in a number of years,” he said.

“The president’s hesitation to sign the pension adjustment will not affect their January increase. The average pension in January 2024 will increase by the announced roughly 400 crowns,” economist Lukáš Kovanda agreed with him on X.

Jurečka: There was no motivation to save at all costs

“It’s the president’s decision, which I respect. I said I would respect whatever decision he made,” Minister of Labor and Social Affairs Marian Jurečka (KDU-ČSL) told journalists this morning. He added that he would wait for more detailed arguments. He emphasized that in the future, the amendment reduces spending by 0.6 percent of gross domestic product (GDP) compared to today. In today’s terms, it is around 50 billion crowns.

“The scissors are opening. There was no motivation to save at all costs. Valorization should be fair and not spread the scissors. From the point of view of an economist, this may be an argument (further increase in spending), but from the point of view of a person who is responsible for maintaining solidarity, it is not. That is why we proposed this change.” said Jurečka.

According to him, the argument about the lack of a transition period is also “out of place”. “For at least half a year, people knew what the amendment brings, what the changes will mean in terms of their decision-making,” said the head of the department of labor.

What does the amendment bring?

According to the draft, early retirement will be possible no more than three years before reaching retirement age instead of the current up to five years. The amount received will be reduced more than before, and the meritorious part of the pension will not be valorized until the due date of the pension. A year later, the extension of the minimum period of payment of contributions as one of the conditions for entry into early retirement by five years to 40 years is to come into effect.

At the regular January valuations, pensions are now increased by inflation and by half of the increase in real wages. From next year, price increases for pensioners’ households should be taken into account exclusively. A third of real wage growth will be taken into account, as it was before 2018.

If the prices were to rise by at least five percent since the last addition, pensioners will receive more money as they do now with the extraordinary valorization, but not until July of the calendar year at the earliest. According to the amendment, they will always receive an allowance until the end of the year, and their meritorious part of the pension will also be increased, but practically also temporarily. The increase will be included in the normal January increase. Unlike now, the extraordinary addition will not be reflected in further valuations. According to the amendment, the temporary addition and increase in percentages will reflect 60 percent of the price increase.