Pension system reform – retirement age and parental allowance

Pension system reform – retirement age and parental allowance


What does the change in social insurance bring? Will the retirement age or the amount of the parental bonus change?

At the beginning of April, the Ministry of Labor, Social Affairs and Family submitted a draft amendment to the Social Insurance Act, which enshrined changes regarding retirement age, early retirement and parental allowance. The aim of the proposal is to improve life during retirement.

Retirement age

One of the major changes and innovations is the proposal on retirement age. Currently, the retirement age is determined based on the table. The Ministry of Labor therefore proposed the possibility of retirement after 40 years of service for people who started working at a young age, and the nature of the work does not allow them to continue until old age.

Another novelty is the assessment of retirement age based on life expectancy. As people will retire about the same amount of time as in their working lives, this change will bring about a long-term maintenance of a sustainable pension system. If a person opts for this form of retirement, his pension will be reduced by 0.3% for each month of early retirement.

The current setting of a system in which a person can retire early, with a pension reduction of 0.5% for each month of early retirement, will be abolished.

Current pension value

The current pension value, which represents the value determined by the Social Insurance Agency and on the basis of which the newly granted pensions are calculated, currently represents an increase of 100% of the average income. According to the new reform, this growth should slow to 95% of average income. The current pension reform is calculated as the share of wages from the third quarter of the previous two years, i.e. from the third quarter of 2021 and 2020.

The new reform is also a response to the demands of the European Union, and promises to improve the sustainability of public finances by 2.4% of GDP over the next 50 years from the newly introduced changes.

Parental bonus

In order to eliminate the unfair payment of reduced pensions to parents who raised children and therefore have reduced pensions, the Ministry of Labor came up with a proposal for a parental bonus, which will be paid in addition to the old-age pension. It will consist of 1.5% + 1.5% of the amount of contributions paid, which will ultimately neither increase nor affect children’s future old-age pensions. The role of the parental bonus is thus the possibility to increase the amount of your parents’ pension, but not more than 1.2 times the child’s gross monthly salary.

The payment of the parental bonus will start automatically from 2023 covering the register of biological parents and adoptive parents. If the child deems it appropriate to pay the parental bonus to his foster parents, he/she may announce it by the end of October 2022. If he/she decides not to pay the parental bonus to anyone, he/she may do so by notifying the Social Insurance Agency by the end of October 2022.

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