CZECH REPUBLIC: Government Agrees To Gradually Raise Retirement Age To 65 Years

PRAGUE (Reuters), February 11, 2008: The Czech centre-right government approved a bill on Monday gradually raising the retirement age to 65 years in order to secure long-term fiscal stability. The bill, which needs parliamentary approval, lays the basis for wider pension reform that would allow people to divert part of their pensions contributions, now paid to the state, to savings plans. The three-party cabinet approved the bill unanimously, cabinet spokeswoman Jana Bartosova said. The Czechs need to change the current pay-as-you go system -- where people pay monthly contributions that are immediately transferred to pensioners -- to a partially fund-based system where people save individually to fund their pensions. The change is needed to cope with population ageing, and to prepare for adoption of the euro some time after 2012. Politicians have for years declared a willingness for reform but never found cross-party consensus on how to proceed, and governments shied away from pushing the changes through parliament without opposition backing. But the ruling coalition agreed last month to go ahead with the reforms on its own after leftist opposition parties disagreed with the plan. Current legislation is gradually raising the retirement age to 63 years for both men and women, from earlier 60 for men and 57 for women. Under the new plan as proposed to the cabinet, the age would gradually rise to 65 by 2030. The reform would also extend the minimum time of employment to qualify for full pension to 35 years from 25 years. Further steps, planned for the following years, include creating a cash reserve, fed by income from privatisations, to fund the opt-outs allowing people to divert part of their pension contributions to savings. Reporting by Jan Lopatka and Jan Korselt Editing by Mike Peacock © Guardian News and Media Limited 2008