CZECH REPUBLIC - The Czech government is considering setting up a "low-cost" state-run pension fund to oversee people's retirement savings which may put pressure on private pension managers to keep fees low.
The Cabinet should have all draft laws for overhauling the deficit-making pay-as-you-go pension system ready "in three to six months," Prime Minister Petr Necas told a conference in Prague today. Details of the pension revamp are still subject to an agreement among the three ruling parties, he said.
"A low-cost fund would be positive not only for helping to overcome the barrier people have to sending money to private corporations," Necas said. "A similar fund could also push the fees downward."
The Czechs are the last of the four largest post-communist economies in the European Union to boost private savings for retirement as the government expects an ageing population to reduce the number of workers paying for pensions of the retired.
The Cabinet wants to avoid the difficulties suffered by Hungary and Poland, where pension changes widened budget gaps, forcing a reversal of their overhauls.
The three Czech ruling parties agreed in February to allow people to voluntarily divert part of their pension payments to private accounts from the state-run pay-as-you-go plan. Necas, whose administration took power in July, said the government will use extra proceeds from raising the value-added tax on some goods to compensate for the resulting loss of budget revenue.
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