Prime Minister Petr Fiala said the Czech government on Tuesday approved pension reforms that will allow the retirement age to be raised to 65 and above to meet the needs of an aging population.
The reforms are expected to come into force in 2025 and will be submitted to parliament, where the government has a majority.
“This reform will guarantee dignified pensions to people who are currently in their 30s and 40s,” Fiala told reporters.
“If we do not approve, the system will not be sustainable and will collapse sooner or later,” he added.
The retirement age has been steadily increasing, and currently the upper limit for people born after 1971 is 65.
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After the reform, the retirement age will be raised along with life expectancy and will be set annually for people who have just turned 50.
It is estimated that this reform will mean that the average Czech will spend 21.5 years in retirement.
The government predicts that the pension balance will be in the red equivalent to 1% of gross domestic product (GDP) in 2050 after the reform, compared to 5% without the reform.
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“In 2000, one in five people had a pension; by 2050, it will be one in two. It's clear that something has to be done,” Fiala added.
The minimum pension will be raised to 20% of average wages.
The reforms will also allow people in risky jobs to retire up to five years early.
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The Czech Republic is an EU member state with a population of 10.9 million people and an economy that relies heavily on car production and exports to the euro area.
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