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Jan Škorpík 7 . May 200 9

Czech pension system and financial crisis Regional (ECA) Workshop – Pension Systems in Times of Financial Crisis. Jan Škorpík 7 . May 200 9. Mandatory, PAYGO, DB pillar (basic pension insurance) Universal scheme Old age, disability and survivors pensions Contribution rate 28 %

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Jan Škorpík 7 . May 200 9

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  1. Czech pension system and financial crisis Regional (ECA) Workshop – Pension Systems in Times of Financial Crisis Jan Škorpík 7. May 2009

  2. Mandatory, PAYGO, DB pillar (basic pension insurance) Universal scheme Old age, disability and survivors pensions Contribution rate 28 % Covers close to 100 % of population Plays major role in pensioners incomes Dynamic pension formula Flexible retirement Continuous reform process since the beginning of 90´s General overview

  3. Ageing vs. Financial (and economic) crisis • Problem of population ageing • Major reform steps focus on retirement ages increase • Process of retirement age increase started at 1996 and to 2030 RA will growth by 5 years (for some specific categories by 10 or more) for men and 8 years for women • Due to type of financing and small or rather no reserve fund there is no direct impact of financial crisis • But, we expect indirect impact through lower economic growth (or recession)

  4. Retirement ages

  5. Long term PS position

  6. Impacts of economic crisis on CZ pension system • Lower employment rate (higher unemployment, more people out of the labour market) • immediate efect – lower revenue = > PS deficit • long(er) impact – lower pensions (expenditure) = > PS surplus • total efect on PS stability depends on PS´s generosity(non contributory periods)

  7. Impacts of economic crisis on CZ pension system (II) • Lower (real) wage growth, low inflation or deflation • immeditate efect • lower revenue • due to dynamic pension formula and pension indexation – lower expenditure • long(er) term impact – no significant (maintain stable relative value of pensions to wages)

  8. Impacts of economic crisis on CZ pension system (III) • Early retirement • immediate efect – more pensioners = > higher expenditure • total efect on PS stability – due to flexible retirement (early retirement reductions and bonuses for deffered retirement) with close to actuarial neutrality no impact on stability

  9. Thank you for your attention

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