Pension reform in the Czech Republic: ageing rapidly, reforming slowly

Although its demographic structure is at present relatively favourable, the Czech Republic is expected to undergo a process of very rapid population ageing. The share of population aged 65 and more in working-age population (15-64 years) is expected to almost triple by 2050. The speed of ageing should be very pronounced in the Czech Republic as the change in this share is projected to be the second largest in EU-25. Parametric reforms implemented so far have not been able to counteract the costs of ageing in the long run and further reform steps are still needed. However, the Czech government has been slow to implement more systemic measures, such as the introduction of a fully funded pillar. Uncertainties about the economically “correct” way to reform the pension system and difficult distributional trade-offs have led to an intense political debate on what direction further reform should take. The independent expert group on pension reform that has been set up is an important step towards finding a reform solution.