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Politicians are leading us towards retirement hell

UGLY TRUTH: The Czech Republic is turning into the land of the elderly, without a pension reform we're in for a collapse

David Budai
10.Aug 2020
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3 minutes
Senioři si povídají

Few numbers speak as clearly as the demographic outlook of the Czech Republic. One third of the population will consist of seniors, there will be a rapid increase in the number of centenarians and a lack of economically active people. Unless a miracle happens, we'll hit an impenetrable retirement wall at full speed in a few years.

Ruce sedících seniorů, jeden drží míček
Dva senioři na procházce
Ruce sedících seniorů

It's starting to be a little awkward, because we've been hearing about it for over 20 years. About pension reform and the fact that the pension system needs to change, otherwise we're in for financial hell. Countless pension commissions have already met, always coming to the same conclusion - something needs to be done about pensions. The warnings are rolling in from all sides: Brussels, economists, statisticians, even Kalousek, who "is to blame for everything".

But this time, Kalousek is not guilty. The problem originates in the 70's, when Husák, with his generous family policy, kickstarted a babyboom, whereupon 200,000 children were born every year. And Husák's children will retire in 10 to 20 years. This intersects with the fact that in the 1990s, on the contrary, not many children were born, because young people wanted to enjoy their freedom. Soon, there will be a lack of people in working age, and there's nothing we can do about it.

4,000 new seniors every month

Where is it all heading? Today, there are about 2.4 million seniors in the Czech Republic, in ten years there will be a million more and the number will continue to grow. In the last two years alone, almost 100,000 poeple have reached retirement age, which is over 4,000 thousand new seriors every month. In mere 20 years, a third of the population will be over the age of 65. By the way, every 5th person is over that age today.

Luxusní byt s terasou Praha 5 - 108m
Luxusní byt s terasou Praha 5 - 108m, Praha 5

These are not fictitious numbers, but a demographic projection of Czech statisticians, based on the people living in the Czech Republic today. And they have calculated that:

Today, there are less than 500 seniors aged 100 and over in the Czech Republic. In 2050, there will be 10,000 of them.

The number of people over the age of 85 will be five times higher than today.

For 20 years, there have been more seniors in the Czech Republic than children under the age of 15.

If foreigners from Slovakia, Ukraine and other eastern countries weren't flocking to the Czech Republic for work, our population would have already been gradually dying out. There are over 650,000 of them now, keeping our economy afloat.

Pensions are already in red numbers

And what does all this mean? Expenditure on pensions will increase significantly in the next 20 year, and at the same time there will be fewer people earning on them. If nothing changes, every year the pensions will be eating away more and more money from the state budget. Additionally, in the first six months of 2020 alone, the pension "account" has dropped almost 14 billion crowns into the red. That means that today, less money is collected on social insurance than paid out in pensions. And that's just the beginning. If nothing changes, an economic tragedy awaits us.

Luxusní mezonet s terasou Praha 2 Vinohrady
Luxusní mezonet s terasou Praha 2 Vinohrady, Praha 2

All pension commissions and experts more or less agree that the solutions are basically the following:

A pension reform will be implemented and the current pension system will change

Retirement age will increase to at least 70 years (it is 65 today)

Pensions will be lowered to a half or a third of the current amount

Taxes will increase significantly

Labor migration of young foreigners to the Czech Republic will increase significantly

Investments and expenditures will be significantly reduced (these may include public transport, construction of motorways and railways, healthcare, the army, education, agriculture and other areas)

Unfortunately, none of the above is happening yet. A reform is nowhere in sight, politicians are reluctant to raise retirement age, pensions are constantly rising, politicians want to reduce taxes (the abolition of the super-gross wage is now being addressed) and the foreigner residence permit system has long been very strict, slow and complicated for Czech companies. And savings? That's a chapter in and for itself. Our motorways already are in a really bad shape and we have some of the slowest railways in Europe.

Luxusní byt na pronájem - Praha 1 - Josefov
Luxusní byt na pronájem - Praha 1 - Josefov, Praha 1

Everything is going sideways. And if politicians don't take their heads out of the sand and agree on what to do about it, we're in for a lot of fun. Followed by bitter tears.

Hard number: 512,000,000,000

That's how many crowns the state will pay out in pensions this year. It constitutes about a third of last year's budget. And that's just the beginning, the aging of population isn't even in full swing yet.

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