Sunday, September 10, 2006

Czech Pensions

by Edward Hugh

I just found this article from the Prague Daily Monitor via a link on an interesting looking website called Age Times. It is pretty wooly, but the fact that the Czech pension system is already going into deficit does start ringing alarm bells. The problem obviously can only get worse if they don't have a substantial reform, but to have anything more to say I think I will need to look into this a bit further.

"Prague, Sept 4 (CTK) - The Czech pension system will probably be in equilibrium for the last time this year and will slide into a deficit in the following years, new Labour and Social Affairs Minister Petr Necas told journalists Monday.

He said a change in the pay-as-you-go system applied now and an adjustment of voluntary pension private schemes will be among his priorities.

Necas said the change should more motivate people to contribute voluntarily to their pension schemes.

According to previous data, it was hoped that the new pension system would last for another 20 years without running into a deficit."

Obviously it is a good idea to encourage people to take out private pensions, but the big issue - given the fertility decline - is the existence of the 'thicker' generations of people who are already over 50. The young people, who are much fewer in number, will be having to do double book-keeping as they pay for the previous generation and accumulate resources for their own pensions. This was always going to be a problem.

No comments: