The Czech government has proposed legislative reforms that would see old-age pensioners who have had a certain private pension product for less than five years being able to leave without penalty and receive one-off compensation.

Under current rules, pensioners who have saved into a voluntary, state-supported private pension product (DPS) for less than five years would not receive their state contribution.

According to the Czech Ministry of Finance, around 180,000 pensioners are in a situation where they would have to wait for the five-year period to end so they can leave without sanctions.

It argued the state contribution was an important benefit for those affected, without which the DPS was less effective.

Some pensioners had already left the DPS with less than two years of contributing to the product, which meant their deposits were returned as the two-year minimum set by law meant it ended without any funds being paid out.

Under the new proposals, pensioners will be able to leave the DPS without penalty, and those who decide to do so will be entitled to one-off compensation.

The compensation is set to cover the around 100 people who had withdrawn within two years and lost their funds, alongside approximately 14,000 people who had been in the DPS for between two and five years and lost state contributions and potential tax benefits.

Pension companies will provide the compensation for those affected, which the state will return to the pension companies.

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