Friday, 20 October 2017

Czech parties' proposed changes in pensions to rise deficit

ČTK |
4 October 2017

Prague, Oct 3 (CTK) - The proposed changes in the pension scheme Czech parties have published in their programmes before the October general election would increase the deficit in the pension system and fall in its revenues, according to a study of party programmes published on Tuesday.

The changes do not primarily want to increase the role of "merit principle," the study, conducted by the Institute for Democracy and Economic Analysis (IDEA) of the Economics Institute (EI) of the Czech Academy of Sciences, said.

The parties do not primarily propose any measures to increase the benefits for the work of the retired and pay little, if any attention to widow's, widower's and orphan's pensions.

In the long run, the expenditures on pensions are higher than revenues, due to which the system has faced a deficit for years.

In the past years, the shortfall was lowering, primarily due to an economic growth as more people pay their contributions from higher salaries.

The deficit for 2013 was 49.7 billion, but it fell to 16.3 billion crowns last year.

According to the original budget bill, it was to fall to 6.8 billion crowns.

However, the government has sent a different proposal to the Chamber of Deputies under which the pension system is to reach the surplus of 6.6 billion crowns.

According to the analysis, the accumulated deficit of the budget account has reached 260 billion crowns since 2010.

In their programme, parties have neither costs, nor sources of financing, the study said.

"Parties often come up with the changes that demand much money from the budget, while they do not cover the additional expenditures," it added.

The costly changes include the proposals to lower compulsory payments to the pension system, the maximum retirement age at 65, the increase in minimum pension to 40 percent of average salary and the option to send a part of compulsory payments to the parents' pensions.

The election programmes largely ignore the support for working pensioners.

In the Czech Republic, people mostly only retire because they are entitled to the pension. A mere 13 percent of pensioners keep working, while in Sweden and Britain it is 35 percent.

Only the Realists (a small, extra-parliamentary party) suggest the lowering of compulsory payments to the working pensioners. The rest of the parties propose the reduction for all. This would have the side-effect of more people working even after the retirement age, but the pension system would lose some of its revenues, the study warns.

The redirecting of a part of social insurance payments to parents' pensions, proposed by the Christian Democrats (KDU-CSL) and the Civic Democratic Party (ODS), would also rise the deficit.

In addition, they want the amount of the pension to depend on children's earnings. If the pensioners had daughter or disabled offspring, they would get less. In fact, women earn one-fifth less than women while disabled people only with difficulties find jobs, the study said.

ANO wants to raise the fixed part of the pension that would be the same for all. The Greens, Pirates and Communists promise a higher minimum pension.

"These proposals bring about a levelling of pensions, ignoring the merit principle," the study said.

In its earlier studies, the IDEA said the Czech pension system is based on a very strong solidarity, considerably redistributing its money.

The Social Democrats, the Citizens Rights Party (SPO) and Mayors and Independents (STAN) mention the option of earlier retirement for demanding professions, to which employers should be contributing more.

However, the study said in the international comparison, Czech employers already paid "an extremely high insurance."

It is crucial for the living standards how the indexation and how the widow's, widower's and orphan's pensions are set, the IDEA said.

The parties tend to assure the public that they will keep the current model and ignore the widow's, widower's and orphan's pensions.

However, there is a growing number of elderly women who have lost their partners, the study said.

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