Czech state spends 10 percent of GDP on pensions

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published: 27.12.2013, 16:48 | updated: 27.12.2013 17:12:32

Prague - The Czech Republic spends 10 percent of GDP on pensions now and the share has been steadily rising while the proportion of the a monthly pension to the monthly wage has been decreasing, statistical figures released by the Labour and Social Affairs ministry have shown.

The state spending on pensions rose from 6.7 percent of GDP in 1993 to 9.6 percent in 2011 and 9.9 percent last year, the ministry said.

Eurostat data show that the Czech share of GDP spent on pensions stands below the EU average, which was 12.5 percent in 2009. Out of all EU states, the share was lower only in Estonia, Bulgaria, Slovakia, Latvia, Cyprus and Ireland.

The average monthly pension made up 42 and 54 percent of the average gross and net monthly wage last year, respectively.

The Czech society has been ageing and the number of old people rising. Brand-new pensioners are entitled to higher pensions in view of their previous higher wages.

Moreover, pensions have been regularly indexed.

While the spending is on the rise, the proportion of the pension to the gross and net wage has been declining, from 47 and 60.1 percent, respectively, in 1993, to 41.6 and 53.1 percent, respectively, in 2012.

The proportion was identical in 2009, but it was the most unfavourable in 2008 when a monthly pension made up 40.2 percent of the gross monthly wage.

Under the International Labour Organisation (ILO) rules, pensions should not drop below 40 percent of the average gross wage.

The proportion of the average pension to net wage was the most favourable in 1993 and in 1998, when it reached 60.1 and 59 percent, respectively.

The situation was the worst in 2006 when the monthly pension made up 52.7 percent of the net wage.

In 2012, the average monthly pension stood at 10,770 crowns, compared with the average gross wage of 25,903 crowns and the average net wage of 19,903 crowns.

In 1993, the average pension was 1496 crowns, and the gross and the net wage stood at 3095 and 2451 crowns, respectively.

Czech pensions have been regularly indexed. The former right-wing cabinet of Petr Necas (2010-June 2013) slowed down the indexation within a series of austerity steps.

In January 2013, the fixed part of the pension, for which all pensioners are eligible, was raised by 40 crowns to 2270 crowns, and the flexible part, depending on the pensioner´s previous wage and years spent at work, was raised by 1.6 percent.

As from January 2014, the fixed part will increase by 10 crowns and the flexible part by 0.4 percent, which means an average increase of 45 crowns.

The indexation is derived from the growth of the real wage, which has declined in the Czech Republic recently.

In the 10.5-million Czech Republic, the Social Security Administration (CSSZ) paid out a total of 1.72 million of old-age pensions as from end-September 2013, and a total of 2.85 million of all types of pensions, including the old-age, disability, widow´s, widower´s and orphan´s ones.


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