Advisers pass pensions to state

A government-appointed body of policymakers, economists and academics has released its final proposal for state pension reform, one in a series that offers recommendations and questions for the government to consider as it prepares an overhaul of the pension system.

"This is the final decision from the NERV [National Economic Council] pension reform committee," said Jan Procházka, an analyst with the Cyrrus brokerage firm and a member of the pension reform committee. "We are finished, and it's up to the politicians now to prepare their proposal and make some decisions."

The report echoed Procházka's sentiment, stating at its conclusion that "the role of the economic advisory teams, in the absence of major policy decisions, is essentially exhausted."

Prime Minister Petr Nečas said he and his Cabinet appreciated especially some of the open questions, which include whether to include state bonds in a pension fund. The prime minister met with NERV and political party representatives for more than four hours Dec. 13 to discuss the proposal, Procházka, who attended the meeting, told The Prague Post.

"We will consider NERV's proposal when deciding what form the pension reform will take," Nečas said.

NERV's proposal includes creating a unified VAT (value-added tax) rate, combining the lower and upper rate to a flat 19 percent. The unified VAT rate would compensate for a drop in revenues that would result from its proposal to decrease the mandatory contribution rate from 28 percent to 23 percent. Of the 23 percent that taxpayers contribute to pensions, 3 percent should be applied toward investment funds, either on the private market or through state funds. That measure would only apply to those 40 years old and younger upon adoption, which the NERV council would like to see happen by 2015.

The retirement age should also become unified for men and women by 2050, and the council would also like to repeal a clause that allows widows and widowers to collect on deceased spouses' pensions for the remainder of their lives.

Elsewhere in the region, Hungary's Parliament approved a law Dec. 13 that requires citizens to shift private pension accounts back to the state, a move that will lower the state debt in a strategy to improve finances that critics call short-sighted. Private pension fund associations have said they will challenge the new law in the courts.

Claire Compton can be reached at
ccompton@praguepost.com