Czech pension system

The Czech pension system regulates two components. One is mandatory, the other is optional. And on top of that, you can always save/invest locally or globally, without government intervention.

For those who are familiar with EU pension pillars, the Czech Republic regulates these:

1. First pillar – the key system based on a running basis (pay-as-you-go), with contributions from the economically active going to the in-use pension fund to today’s retired.
2. (Second pillar, employer pension schemes, is absent in the Czech pension insurance system.)
3. Third pillar – a voluntary, complementary pension saving option with state contributions.
4. Global savings and investments.

The Czech pension system regulates two pillars (1 and 3). One is mandatory, the other is optional. And on top of that, you can always save/invest locally or globally, without government intervention.

1. pillar: Compulsory insurance contributions

When employed in the Czech Republic (or even self-employed), you’re required by law to pay monthly contributions towards the Czech pension system. Most probably, your employer deals with the administration directly, you don’t see the money going away yourself.

But for your information, this money (důchodové pojištění, “pension insurance”) contribute towards these types of pensions that the state then distributes and awards: old-age pension (including the so-called early old-age pension), disability, widow and widower, and orphan pension. In the case of an old-age pension, the mandatory contributions are what we call “the first pillar” of the pension scheme.

The first pillar is the mandatory basic pension insurance based on a running basis (pay-as-you-go) and providing benefits to the retired. That way the money flows each month from economically active workers directly to the retired. So there is no such thing as investing or saving this money for your own retirement. There is no way to get your contributions out / back from the system because you left the country.

You, on the other hand, are participating in social security and therefore collecting the insurance time that is crucial to be later entitled to the pension. If you move between EU countries or countries which have international social security agreements, your insurance periods count in one pool.

Conditions to receive the pension include 1) the retirement age and 2) the insurance period. At the moment when you reach the retirement age and contributed long enough (both are different for each country and change all the time), you may apply for the pension in the country of last residence and the EU Social Security offices will gather all documents from the other countries.

The retirement age in the CR is now between 60-65 years of age (depending on a year of birth or number of children) and the insurance period needs to be 35 years. There are exceptions though and there is something called early retirement. The calculation of the pension is quite complicated, depending on the insurance periods and salaries in all the countries you have worked. (The average retirement pension was about 16 000 in the CR in 2021, you can try this online pension calculator for a very rough idea)

Czech Republic – Old-age pension is explained in more detail by the European Commission.

And another way to explain the same, at the website of Profiexpats accounting.

2. pillar: Employer pension schemes

Second pillar, employer pension schemes, is absent in the Czech pension insurance system.

3. pillar: Optional saving with Czech pension funds

In addition to compulsory pension insurance, there is a voluntary, complementary pension saving option with state contributions. The additional pension saving can be, according to the EU terminology, considered the third pillar of the pension system. The “second pillar”, which is usual in EU member states – employer pension schemes, is absent in the Czech pension insurance system.

This saving option includes products offered by commercial companies, funds, and banks. Employees have the option to start saving for retirement, employers can contribute, and the government chips in a little bit and regulates this type of pension funds (see the list of pension funds recognized by the Czech National Bank). To be entitled to the government contributions and benefits you need to retire in the CR or at least live here long enough (over five years) to get any benefit on it.

State contribution is dual. 1) the state gives you each month max. 230 CZK if your savings are 1 000 CZK or above, 2) the state allows to lower your tax base for up to 24 000 CZK  every year (for contributions above 12 000 CZK a year) – which translates into max. 3 600 CZK discount on your yearly income tax.

The employer’s contribution is not determined by any law and depends totally on your negotiation skills. Unlike with a salary bonus, employers don’t have to pay any taxes on top of the contribution to the employee’s pension fund.

To take full advantage of the Czech pension funds, you need to plan to retire in the CR!

The optional saving to Czech pension funds is quite well explained on Wikipedia.

The complete list of approved pension funds in the CR is available at the website of the Czech National Bank:

• Allianz penzijní společnost
• Conseq penzijní společnost
• Česká spořitelna penzijní společnost
• ČSOB Penzijní společnost
• Generali penzijní společnost
• KB Penzijní společnost
• NN penzijní společnost
• UNIQA penzijní společnost
• Rentea penzijní společnost

(4. Global savings, investments…)

Finally, you can invest money in some global funds or property or stock etc. independently of the country you live or you will retire in.

In case you are interested in the options for individual additional pension savings or global funds or investments or commodities, you can contact any financial consultants and they will be happy to explain the options. The consultants don’t charge for such consultations, because they get provisions from the financial institutions and funds if they broker a new deal. Check out our recommendations for expat friendly financial services.

The average Czech pension in 2023 is around 19 000 CZK per month.

The Czech system (the compulsory First pillar) is based on two main principles. It balances the principle of rewarding personal achievements with solidarity. What it means in practice:  every economically active person in the CR has to contribute to the in-use pension fund for retired people of today; you aren’t saving the money for your own retirement.

You just hope that when you retire, there will be some pension system in place, and workers of the future will contribute to your pension 🙂 If you move between EU countries or countries which have international social security agreements, your insurance periods count in one pool and you can be entitled to a retirement pension.

No, you cannot get the money you paid to the compulsory pension insurance (“first pillar” – see above) out when you leave the country.

You can only get a confirmation of your participation in the Czech pension system. If you wish to obtain it, fill up this form (The Application for the Informative Personal Document of Retirement Insurance, Žádost o informativní osobní list důchodového pojištění in Czech), put it to the envelope and send it to the Czech Social Security Headquarters in Prague (ČSSZ, Odbor správy údajové základny, Křížová 25, 225 08 Praha 5) as a registered letter. The office will send you the Informative Personal Document of Retirement Insurance containing the overview of the period you have been contributing to the Czech pension system within 90 days of receiving the application. Bear in mind though that this document will only contain confirmation that you were participating in the social insurance and for how long, but it WILL NOT contain the amount of money you have paid.

However, you can get your savings back from the pension fund (“third pillar”), in case you have voluntarily saved in the pension fund. Ask your financial advisor or the pension fund, what are the conditions to get the money prior to retirement.