CMS Expert Guide to Pensions in Czech Republic

For more than a decade, the Czech pension system has been subject to continuous change. The latest changes took effect in January 2025, with further changes scheduled for January 2026 and January 2027.

Currently, the Czech pension system is based on two main pillars: the mandatory state pension system and voluntary private savings, which are supported by the state. 

The mandatory pillar operates on a pay-as-you-go basis. Employees and the self-employed contribute to this system, which is administered by the Czech Social Security Administration. 

The voluntary pillar includes supplementary pension schemes, long-term investment products and, more broadly, certain private insurance products such as life insurance and long-term care insurance. Pension insurance also exists, although it is no longer open to new applicants, as the programme has been closed to new entrants. However, it continues to operate for individuals who enrolled previously. 

All tools within the voluntary pillar are incentivised through tax advantages and state contributions, to encourage individuals to save for retirement.

In addition to the mandatory pay-as-you-go system, there are voluntary supplementary pension schemes and long-term investment products (voluntary pillar).

Participation in the voluntary pillar is open to anyone alongside the mandatory state system. Individuals may join supplementary pension schemes or long-term investment products at any time. However, there may be restrictions on when they can exit or minimum participation periods before benefits can be claimed.

Participation in the pay-as-you-go state system is compulsory. Participation in supplementary pension schemes, long-term investment products, or any other arrangements within the voluntary pillar is optional.

To establish a supplementary scheme, a specific licence from the Czech National Bank (CNB) is required – see the following question.

Employers typically do not establish company pension schemes. However, they can provide an employee benefit by contributing to the employee’s chosen supplementary pension scheme or long-term investment product. From January 2026 onwards, employers will be required to provide this benefit to every employee performing high-risk work (category III) who requests it.

The state, through the Czech Social Security Administration, guarantees the mandatory system.

Only pension companies are permitted to offer a supplementary pension scheme. These companies must obtain a specific licence from the Czech National Bank (CNB) to establish a participation fund. 

Several entities, as specified by legislation and already subject to stringent regulation, may offer long-term investment products. These include, for example, banks, securities dealers, investment companies, investment funds, or comparable foreign entities authorised to operate in the Czech Republic.

Contributions to the mandatory pay-as-you-go system are calculated as a percentage of gross income. For employees, the total contribution is split into 6.5% paid by the employee (deducted from gross salary) and between 21.5% and 25.5% paid by the employer (on top of gross salary), depending on the employment risk classification. The self-employed usually contribute 28% of their assessment base. 

Employee incomes exceeding 48 times the average monthly salary (approximately CZK 2.2 million, or EUR 88,000) are exempt from these deductions. 

From January 2027 onwards, married (registered) couples will have the option of using a 'joint assessment base' with their spouse. This will not change the amount of contribution paid by the individual, but it will change the assessment base for the future pension payments. This will be voluntary, and the married (registered) couples will have to actively opt in.

Participants in the supplementary pension scheme may also receive additional state financial support alongside their own monthly contributions. The minimum contribution required to qualify for state support is CZK 500 (approximately EUR 20). While there is no upper limit on monthly contributions, the maximum state support is CZK 340 (approximately EUR 15) per month. This amount is granted to those contributing more than CZK 1,700 (approximately EUR 70) per month; higher contributions do not attract greater state support. 

Individuals who are already receiving benefit payments from the state pension system are not eligible for this financial support.

The minimum initial capitalisation of a pension company offering a supplementary pension scheme is CZK 50 million (approximately EUR 2 million). 

For long-term investment products, the minimum initial capital requirement depends on the type of entity providing the product.

7. What age are benefits taken?

To qualify for a state pension, an individual must have contributed to the system for the required number of years or have a legal exemption (currently 35 years). They must also reach the retirement age, which is currently around 65 but is expected to rise to approximately 67. For women, the retirement age may be lower depending on the number of children they have raised; however, this rule is being phased out and is expected to gradually disappear within the next 10 years.

Benefits from the supplementary pension scheme and long-term investment products follow the same conditions: individuals who have been saving for at least 120 months may begin receiving benefits from the age of 60. Different rules apply in the event of disability of the participating individual.

Participants or contributing employers may bear the costs. The terms and conditions of each supplementary pension scheme and long-term investment product provider may vary. For example, a supplementary pension scheme is often free of charge (although additional services may be subject to fees), whereas a long-term investment product is more likely to involve investment charges. However, this is not a universal rule.

Employers and the self-employed must register with the relevant tax authority.

Employers' contributions to the mandatory state system are not taxed. Employees’ contributions to the mandatory state system are effectively taxed, as income tax is calculated based on gross income—which includes the portion paid as contributions to the state pension system. 

In respect of the supplementary pension scheme and long-term investment product, contributions are generally not subject to personal income tax. However, if an employer contributes to a supplementary pension scheme or long-term investment product on behalf of an employee, the contributions will be taxed as part of the employee’s personal income if they exceed CZK 50,000 (approximately EUR 2,000) per year.

Investment returns are typically taxed at a rate of 15%; however, many cases qualify for tax exemption.

12. Are benefits taxed?

Benefits from the mandatory scheme are subject to personal income tax only if the cumulative annual amount exceeds the statutory threshold (36 times the minimum wage).

Pension benefits (income from payments under a supplementary pension scheme or long-term investment product) that are paid for at least 10 years or for the remainder of the recipient’s life are not subject to tax. 

Otherwise, both types of pension payments are subject to income tax.

Individuals may deduct contributions to supplementary pension schemes and long-term investment products from their tax base, up to CZK 48,000 (approximately EUR 1,850) per year.

In addition, employers may deduct contributions to supplementary pension schemes and long-term investment products paid on behalf of their employees from their tax base, up to CZK 50,000 (approximately EUR 2,000) per employee per year.

There are no limits on contributions to supplementary pension schemes and long-term investment products. However, even if participants contribute more than CZK 1,700, their monetary state support will not increase.

In addition, the deduction of contributions from the tax base is limited (see previous question).

In general, the CNB supervises the providing entities (i.e. providers of both supplementary pension schemes and long-term investment products). Where a breach of obligation occurs, the CNB may order remedial measures or withdraw the entity’s licence.

Providers of long-term investment products must be registered in the list maintained by the Czech National Bank; failure to do so may result in a fine.

In general, the CNB is entitled to all the information it requires for proper supervision. 

Pension companies are required to provide certain information to the CNB automatically, and the CNB may request any further information about a pension company’s activities that it deems necessary for supervisory purposes. 

In the case of long-term investment products, the legal rules applicable to the entity providing them must be followed.

There are generally no special insolvency rules for pension funds.

For long-term investment products, the legal provisions applicable to the entity providing them must be followed.

It is prohibited to discriminate against participants on the grounds of gender, race, skin colour, language, religion, political or other opinions, national or social origin, ethnicity, wealth, family background, state of health or age.

Participants in a supplementary pension scheme may terminate their participation after a minimum duration of 24 months. The scheme must specify the relevant notice period for this purpose, which cannot exceed one month. Early leavers who have participated for at least 24 months are entitled to request a severance payment (the sum of the participant’s funds excluding any state monetary support). They may also transfer their contributions to another pension fund. 

Participants in a long-term investment product may exit at any time. However, they would be required to repay any tax deductions previously claimed and retroactively pay tax on any employer contributions received (if applicable) for up to 10 years. Income from the sale of investments would also be taxed under the general rules (unless exempt).

Not relevant.

Not relevant.

Only a pension company licensed by the CNB is authorised to provide supplementary pension schemes. 

A foreign entity, such as a bank, may offer a long-term investment product, but only if it is authorised to provide its services in the Czech Republic under the relevant laws.

Participants, on the other hand, are subject to fewer restrictions. Contributions to the mandatory state system are compulsory for employees, the self-employed, and a broad residual category of contributors defined by Czech law. The nationality of these participants is not relevant. 

Participation in supplementary pension schemes or long-term investment products is not generally prohibited for foreigners (though we recommend checking sanctions lists). However, tax benefits are linked to tax residency, and state monetary support for the supplementary pension scheme is only available to individuals with permanent residence in the Czech Republic, or residence in an EU member state, who are covered by Czech pension insurance or public health insurance. 

The payment of a pension (whether from the compulsory state system or a voluntary scheme) after the participant has become entitled to it is not limited by the participant’s place of residence (though an application or at least notification may be required).

Participants may easily switch from one pension fund operating a supplementary pension scheme to another. A transfer fee (of up to CZK 800, or approximately EUR 30) may be charged to the participant.

For long-term investment products, transferring funds (without losing the associated benefits) to another product is only possible if the original tax-supported long-term investment product is cancelled.