The Czech government has submitted a bill to parliament to amend the Supplementary Pension Savings Act, proposing a wide-ranging overhaul of the country’s third-pillar pension system.

The first reading, which took place on 24 September, saw Deputy Prime Minister and Minister of Finance, Alena Schillerová, introduce the “Better Pension” amendment, which aims to encourage greater participation in supplementary pension savings and increase the long-term investment potential of the system.

The package includes measures to encourage pension saving from childhood, introduce a life-cycle investment strategy, reduce fees charged by pension companies and gradually wind down the country’s legacy transformed funds, which have been closed to new entrants since 2013.

The government is proposing that the changes take effect from 1 January 2027, saying it is “desirable for the proposed measures to start working in practice as soon as possible”.

Under the proposals, the life-cycle investment strategy, introduced as a default option, would automatically adjust the investment method to the participant's age, allowing for greater returns and a more personalised investment strategy depending on life stage.

Younger savers would have greater exposure to dynamic investments, with the portfolio gradually moving towards more conservative assets as they approach retirement.

This measure, according to the government, would also be advantageous for pension companies, as they won't have to fill out the investment questionnaire with participants, eliminating the administrative burden.

The government is also proposing a reduction of the fees pension companies can charge.

Schillerová suggested that currently, pension companies charge two main fees: a management fee and a performance fee. Depending on the type of pension fund, the fees are different, with management fees ranging from 0.4-2.5 per cent, and 10-25 per cent for performance fees.

As part of the proposals, the government plans to abolish performance fees and reduce the management fee to a maximum of 0.5 per cent for most pension funds, while alternative funds will keep the existing 2.5 per cent management and 25 per cent performance fees.

Czech pension professionals have previously voiced concerns over the proposed cap on fees for pension companies, and although Schillerová acknowledged this in the reading, she said the government believe that this is necessary as the state contributes CZK 18bn annually from its budget into the pension system.

The reform would also address the country’s transformed funds, which can no longer be re-entered, but still account for almost half of all participants and provide low returns.

The government proposes to end its activities at the end of 2036 to give participants and pension companies enough time to prepare.

The proposals also seek to bring younger savers into the system. Children would be able to qualify for state support from a monthly personal contribution of CZK 100.

And to make saving into a pension more attractive, the government also proposed that any individual who has at least 10 years of savings will be given the opportunity to withdraw a third of their savings until their 36th birthday.

The government said that according to its findings, this was the main factor that discourages young people from setting up a pension.

In her closing, Schillerová said: “I really feel that it is necessary for people, for young people, for young families, to try to motivate them, to simply be more involved in the growth of the third pillar, when we hear criticism of the first pillar so often, and to focus on this area as well.

“I will do my best to push through this law on behalf of our government, because I consider it beneficial for people, for young people, for young families."

The bill will now proceed through the Chamber of Deputies. The proposed 1 January 2027 implementation date will depend on the legislation completing the parliamentary process and receiving final approval.

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