Czech pension savers who retired before the end of 2023 could soon be allowed to terminate supplementary pension savings contracts without penalties, following the approval of an amendment to the Supplementary Pension Savings Act by MPs.

The changes follow earlier government proposals to allow old-age pensioners with fewer than five years in a supplementary pension savings product (DPS) to leave without sanctions and receive one-off compensation.

Under current rules, pensioners who have saved into a voluntary, state-supported DPS product for less than five years are unable to receive the state contribution attached to the scheme.

The Czech Ministry of Finance estimated that around 180,000 pensioners were affected, as they would otherwise have to remain in the system until the five-year minimum savings period expired before leaving without penalties.

The ministry argued that the loss of the state contribution significantly reduced the effectiveness of the DPS product for pensioners.

Some pensioners had already exited the system after contributing for less than two years, meaning their contracts ended without any payout because the statutory minimum contribution period had not been met.

Under the proposed reforms, pensioners will be able to terminate DPS contracts without penalty even if they have not completed the five-year savings period.

Those affected would also be entitled to one-off compensation payments.

The compensation would apply to around 100 people who withdrew within two years and lost their accumulated savings, as well as approximately 14,000 pensioners who had contributed for between two and five years and subsequently lost state contributions and potential tax benefits.

Pension companies are expected to provide the compensation initially, with the state reimbursing providers afterwards.

The reforms also follow criticism of earlier changes that ended state pension contributions for retired participants and affected contracts signed before the legislation was introduced.

The opposition party ANO had previously challenged the measures in the Constitutional Court, but the complaint was unsuccessful.

Czech Finance Minister, Alena Schillerová, said some affected pensioners could receive compensation for losses incurred because of the reforms, while former Finance Minister, Zbyněk Stanjura, had previously advised savers who had not met the minimum contribution period to continue paying at least CZK 100 per month until they qualified to leave without penalties.

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