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April 8, 2018 9:02 pm | FILED UNDER: politics

Babis’s Pension Plan Short Term Fix According To Economists

By ČTK Andrej Babis

Prague, April 8 (CTK) – The separation of the pension account from the Czech state budget, planned by the government of Andrej Babis (ANO), would not solve the future functioning of the pension system, economist Jiri Satava and analyst Martin Potucek agreed on public Czech Television (CT) today.

 

“I suppose this operation would not solve anything,” said Potucek, who headed a commission for a pension reform in the previous election term.

 

When Babis’s government presented its policy statement last December, the Social Democrats (CSSD) and the trade unions rejected the separation of the pension account from the state budget, too.

 

Potucek said the idea of a separate autonomous system of pension insurance appeared in the Czech Republic in the early 1990s, but it has never been implemented.

 

The current first pillar of the pension system, from which the state pays out pensions, combines pension insurance financed from general taxes and pension insurance financed from the compulsory social insurance fees, he said.

 

Money flows into the current system from many sources in an uncontrolled way, Potucek said.

 

Satava said it would be good to decide how much would be taken from the social insurance fees and how much from other taxes so that the state budget is not perceived as an instrumen, from which money would always be given for pensions.

 

He said it is advisable to monitor how much money the pension system creates, what impact the changes have on the sustainability of the account and how much has to be added to it.

 

The experts agreed that the pension reform should start with something conceptual, like what is excepted from the state-run first pillar of the pension system or the third pillar of private additional pension insurance.

 

In 2017, the Czech pension system did not have a deficit for the first time after eight years. This year, too, more money than will be paid out in pensions is expected to flow into the system, thanks to the Czech economic growth and a low unemployment rate. However, Babis’s government expects the system to have a deficit next year again.

 

In 2012 and 2013, the pension system deficit was nearly 50 billion crowns.

 

Babis’s government proposed to set up a public insurance company to which all pension insurance fees would go and from which pensions would be paid. The insurance company would administer the pension account that would be separated from the state budget as of 2020. The level of the solidarity old age pension would be set, according to the plan.

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