“Our current provisional estimate shows that price growth, measured by the change in the index of the living costs of pension households between July 2023 and June 2024, will increase by 2.1 percent,” Ministry of Labor spokeswoman Kateřina Procházková told News and Rights.
Pensions could therefore increase by this 2.1 percent, which amounts to the above-mentioned 433 crowns on average. “However, it is too early to estimate the exact structure of the pension increase, and therefore the distribution between the basic amount and the percentage amount of the pension,” added Procházková.
The Ministry warns that it is necessary to wait until all the data is available.
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Several factors contribute to proper valuation. In addition to inflation in the consumption basket of pensioners, as mentioned by spokeswoman Procházková, the year-on-year growth in real wages also increases by a third. But there won’t be one next year. “The previous decrease in real wages from 2022 and 2023, which was not reflected in the valuation, must first be compensated for,” Procházková pointed out.
In other words, real wage growth will be taken into account when its average level cumulatively rises above the real wage level from the time it was last included in the valuation. “It will probably happen sometime in three to five years,” economist Filip Pertold estimated last year.
The last time real wage growth was reflected in valuations was at the beginning of last year.
Over the past two years, wages have fallen in real terms after taking inflation into account, by a total of 11.1 percent. They have increased slightly in the last three quarters of the year, but only in quarter-on-quarter comparisons.
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“This year, the real wage will start to rise again, mainly thanks to significantly lower inflation. However, it will take at least three years to catch up with the slump it experienced in the last two years,” added Creditas Bank chief economist Petr Dufek.
The end of the valorization of education
Until recently, half of the increase in real wages was calculated into the valuation of pensions. But the government adjusted the calculation formula due to the rising expenses of the pension system. And it’s not the only change she’s made because of it. The conditions for retirement have also changed, which are less favorable this year than, for example, a year ago.
Other changes planned by the government include, for example, breaking the 65-year-old limit for retirement. In the future, it should be linked to life expectancy, and people would learn when they will retire in their fifties. However, the increase could be a maximum of two months between the nearest years.
At the same time, from 2026 to 2035, the year-on-year increase in newly granted pensions will gradually slow down.
From 2027, there should also be a change in the right to educational allowance. Although it will not apply to parents who are already receiving it, but only to those who will retire, but even for the original parents, education should no longer be valued. For newly granted pensions, it is to be gradually reduced until it is replaced by a fictitious assessment base.
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