The Czech government is contemplating a proposal to replace exceptional pension increases with temporary cost-of-living benefits if inflation rates surge. The proposal is part of discussions surrounding the country’s pension system reform, which is currently being debated in the government coalition. The rise in pensions could also be slowed down from half of the real wage growth to one-third.

Currently, the annual pension adjustment process is carried out based on inflation rates. If the proposal is implemented, pensions will be adjusted according to inflation rates, and pensioners could receive temporary subsidies to cover the increased living costs during high inflation. The proposed cost-of-living benefit will not be a permanent part of the pension and will not increase the pension amount permanently.

The document proposes that the cost-of-living benefit will be paid out when inflation rates reach 5% from the end of the relevant period for the previous adjustment. The payment is expected to be made between July and December before the subsequent regular adjustment in January.

The proposal has been discussed between the government coalition and the opposition party ANO and SPD. However, the Minister of Labor and Social Affairs, Marian Jurečka, has said that there is no final version of the proposal.

While the age of retirement will not be changed, the proposal is aimed at reducing the country’s rising debt, which has been a concern for the National Economic Council of the Government (NERV). Slowing down the increase in pensions and offering temporary cost-of-living benefits could help reduce the government’s expenditure and provide relief to the pensioners during periods of high inflation.

The proposal, if implemented, could have significant implications for the pension system in the Czech Republic. However, the government is yet to finalize the proposal, and it remains to be seen how it will impact the pensioners and the overall economy in the country.

Article by Prague Forum