The government has approved a change in conditions to support retirement savings. If A draft law to amend certain laws relating to the development of financial marketsWith Parliament and Senate successfully passed, significant changes await savers.
The minimum happy change will affect all pensioners who are already receiving pension and continue to save either in Supplementary Pension Insurance (PB) or Supplementary Pension Savings (TBS). They are Support will end in the form of state payments And they leave only appreciation from deposits, which depends on what kind of “pension” they have.
The government’s move in this direction is logical. Retirement savings are for people who need to protect themselves for their future retirement and are supported by the government to do so. At the time of their retirement, the pension savings should be an annuity paid for at least 10 years, which would improve the state’s pension budget. From this point of view, it does not make sense to pay government contributions even to those who are already retired and have already sorted out their pension insurance. Retirement Savings is only a short-term savings product backed by the government.
The second step is to change the amount of state support for those who are still saving for retirement. In future, there will be state contribution amount 20 % From, but not limited to, the amount you send to pension each month 500 to a maximum of 1700 CZK.
What will the new state contributions look like?
| Your monthly deposit (CZK) | State Payment Today (CZK) | Future State Payment (CZK) |
|---|---|---|
| 100 | 0 | 0 |
| 200 | 0 | 0 |
| 300 | 90 | 0 |
| 400 | 110 | 0 |
| 500 | 130 | 100 |
| 600 | 150 | 120 |
| 700 | 170 | 140 |
| 800 | 190 | 160 |
| 900 | 210 | 180 |
| 1000 | 230 | 200 |
| 1100 | 230 + Sleva na Dani | 220 |
| 1200 | 230 + Sleva na Dani | 240 |
| 1300 | 230 + Sleva na Dani | 260 |
| 1400 | 230 + Sleva na Dani | 280 |
| 1500 | 230 + Sleva na Dani | 300 |
| 1600 | 230 + Sleva na Dani | 320 |
| 1700 and above | 230 + Sleva na Dani | 340 + Sleva na Dani |
The minimum savings period will be extended to withdraw cash without penalty (if other conditions are met). For new contracts of today’s 5 years to 10 years. The tax support will correspond to the newly introduced rules in future Also known as long term investment product.
The limits for annual tax deductions will also change:
- It will be fresh Total limit According to the proposal to do so on all tax-supported savings products CZK 48,000 per year per taxpayer,
- While it is valid today half limit CZK 24,000 for pension savings and CZK 24,000 for life insurance,
- Whereas the employer can deduct from tax up to CZK 50,000 per employee per year. This amount remains the same and can be used for long term investment.
- Tax benefit will be in III. Pillars, it is still possible to receive deposits in excess of the amount associated with state allowance payments (currently, deposits above 1,000 CZK per month are associated with a tax rebate, this limit will now increase to 1,700 CZK per month. See the table above).
How to get maximum deduction on income tax
You can now deduct contributions to Supplementary Pension Insurance and Supplementary Pension Savings from your tax base, It exceeds the sum of CZK 12,000 AnnuallyA maximum of 24,000 CZK.
That means you need to save annually to deduct the full 24,000 CZK. CZK 36,000 = CZK 3,000 per month.
This will change after an approved change.
You can deduct contributions to supplementary pension insurance and additional pension savings from your tax base, It exceeds CZK 20,400 AnnuallyA maximum of 48,000 CZK.
per minute. 1,700 CZK per month (which is not tax-deductible), you need to save another 2,300 CZK per month (which is tax-deductible).
Therefore, if you want to deduct a maximum of CZK 48,000 from your taxes after any approved change, you should save annually. CZK 48,000 = CZK 4,000 per month.
Leave the “old” pension, you will not really earn there
The government wants to shift savers who have so far been in conservatively converted pension funds (PB) and have completely negligible appreciation to the new supplementary pension savings (TBS) system. The opportunity to establish a PP ended in 2013, and then the DPS was created, which allows you to invest in state-backed mutual funds, which, depending on the chosen strategy, usually bring better value. The only PB against DPS is that they are guaranteed a negative rating, meaning they cannot get into the red, which could theoretically happen with DPS.
For savers who want to invest in TPS but at the same time want to keep the original BB, however, there is no solution till now. Currently, you can only have one option. However, this is about to change. This amendment will allow you to maintain your contribution while simultaneously contributing to Participating Fund (TPS) in Modified Fund (PP). However, you will only receive state support for a pension.
How Much to Save for Retirement? Up to 200 thousand CZK
Three-quarters of people in the Czech Republic already understand that saving for retirement is a normal part of their lives. It is clear to them that in their senior years they will face cutting costs and a drop in their quality of life, and they are understandably worried.
Half of the Czech population saves regularly and has been doing so for more than 10 years. Majority of them (74%) save up to a monthly amount 2000 CZKAnd the rest are even less 500 CZK. Currently, two out of five have less than 100 thousand crowns saved.
Those who have not yet started saving are mostly young people under the age of 24 or those who have nothing to save due to low income. These people make up one-third of the population. This follows from the “Attitudes of Cheques towards Pensions” survey conducted by IPSOS for Broker Consulting.
The survey shows that people with net income between 40,000 and 50,000 CZKThey currently have savings 250,000 to 500,000 CZK. They have deposited money into retirement and building savings, as well as real estate and to some extent stocks. For the most part, people over 55 rely only on supplementary pension insurance.
Today’s already retired, before going on vacation, often had an amount in between 100,000 and 200,000 CZK. 83% of them were.
3 most frequently used savings products for future retirement purposes
- 1st place is supplementary pension insurance,
- Behind it is a savings account,
- 3rd is additional retirement savings.
Used financial and retirement savings products
I want a million for my pension, but…
Today’s working people say they want to save at least CZK 1 million for retirement, and less than half of today’s savers say they want to start saving more when they get older. However, on average, they often start saving more in their fifties.
Young people under 34 plan to save from 40. After thirty-five, they change their plan and start at 45, they say. People over 55 vow to save more once they reach 60. The survey thus confirmed the phenomenon of postponing the decision to prepare for retirement which can easily lead to financial fragility in the autumn of life.
Since when do people start planning to increase their retirement savings?
Forty-six percent of people will survive a dignified old age with savings of up to 2 million crowns. 20,000 to 30,000 monthly income will be suitable for them.
However, to achieve this plan, people don’t have a solid idea of what they need to do to make their annuity actually be as high as they imagine.
To have an income of about 30 thousand kroner when I retire, in practice it is a monthly pension in addition to the state pension of 10 thousand kroner. But there is a long way to go and everyone should realize that. For someone in their thirties, this is about 2,200 kroner in monthly savings, for someone in their forties, just under 3,700 and for someone in their fifties, 7,200 kroner. Self-production is going to be very important in the future and we need to talk about it,
Opinion poll Martin Novak From broker advice. However, the extent to which people realistically access savings continues to decline with age.
Postponing preparation for retirement is a phenomenon characteristic of the Czech Republic since the revolution, and is unfortunately a major cause of the financial fragility of pensioners in the Czech Republic. Our overall main goal in this regard is to explain to people that if they choose, they can prevent this.
Martin Novak adds.
