“Alarming. They chose the wrong savings.” Three-quarters of senior women will not make it with their pension

More than three-quarters of Czech senior women cannot get by on a pension. Approximately one third would need between two and five thousand crowns more per month, less than one fifth would be helped by one thousand crowns. Only a quarter of pensioners are satisfied with the amount of money they are paid. This follows from a survey by the Ipsos agency, commissioned by the investment platform Fondee.

There can be several reasons why women are more dissatisfied than men. Senior women, for example, have lower pensions on average than men.

“Even last year’s introduction of the education allowance, which added 500 kroner to the pension for each educated child, did not change it either. The difference between the average income of men and women has only decreased from 20 to 13 percent,” explains economist and co-founder of Fondee Eva Hlavsová.

The higher life expectancy of women also plays a role. Senior women with a smaller pension are more likely to be left alone at home. Managing without the help of another person is thus more difficult for them.

According to economist Petr Janský, the problem is deeper. “On the labor market and in society in general, the disadvantage of women, especially mothers, persists. This is then reflected in the pension system,” he points out.

Petr Janský works at the Institute of Economic Studies of Charles University and is one of the 17 members of the Government’s National Economic Council (NERV).

“Even if they weren’t disadvantaged, we still have big income gaps. And they are also reflected in the pension system,” he adds. “It would be more important to solve the problem now in the labor market and in society in general. We do not fully use the potential of some women, for example mothers with small children. This is simply our entire societal problem – from a moral and economic point of view.”

Although women fared worse in the Ipsos survey, dissatisfaction with the amount of the pension affects both sexes. Over 63 percent of respondents reported that their standard of living decreased with retirement.

Most seniors said that they would need at least two to five thousand crowns extra per month for retirement. This was stated by 31 percent of the respondents. Approximately 19 percent would then like 1,000 crowns more, for 15 percent the ideal pension would be a few hundred higher and for five percent by six to ten thousand crowns.

The survey further investigated what Czech pensioners live on. Approximately 64 percent said that they rely only on the state – they have no income other than the old-age pension.

“It’s a high percentage. We would like it to change, so that more people have another source of income and don’t have to rely only on the first pillar. In the future, we would like it to be more spread out in the third pillar as well,” assesses Janský.

According to him, the current setting of the third pillar, i.e. voluntary supplementary insurance supported by the state, is ineffective.

According to the survey, six percent of respondents draw supplementary pension insurance, 14 percent help themselves in retirement with money from a savings account and 10 percent with savings from building savings. Roughly six percent have income from stocks or bonds, and five percent receive money from renting their own property.

“I think these results are alarming. Not only do the vast majority of seniors have no income other than the state pension, but those who have prepared for retirement have chosen the wrong way. The income of the savings account and building savings usually do not exceed inflation. And if I’m saving for retirement in the long term, there are better ways that increase the value of the money rather than cut it,” warns economist and co-founder of Fondee Eva Hlavsová.

Both economists agree that it is necessary to prepare for retirement early. “The state cannot pay you the first pension pillar – it will not give you as much as you earn. For most people, especially those with higher incomes, the difference in living standards is big,” Janský points out.

In addition to the products that are part of the third pillar, he mentions the possibility of index funds, investing in shares or bonds. According to Janský, not only investment instruments play a role, housing and family support are also important.

Hlavsová evaluates the new product of the third pillar better. “Investing, as a preparation for retirement, is a common thing in the West, and the current situation in the Czech Republic shows that the younger generations have no choice but to start with it in time, otherwise they are at risk of poverty on their old knees. In this regard, it is reasonable that the state allowed the introduction of a so-called long-term investment product at the turn of the year,” he thinks.

The support for today’s seniors is currently their own housing. According to the survey, almost 90 percent of them live there. “I wouldn’t say that owning your own home is necessary. But it will greatly affect your economic situation. Maybe it would be different if there was a better functioning long-term rental housing market in the Czech Republic. Currently, it is difficult to have a long-term contract that one can trust,” comments Janský.

“Pensions are relatively egalitarian. I dare say that the bigger difference is not whether you have a pension of 15,000 or 20,000, but whether or not you pay rent,” he adds.

However, the proportion of people who live in their own housing in retirement will probably decrease in the future. “Own housing is becoming more and more difficult for younger generations to achieve. In terms of housing prices, the Czech Republic has long been at the top of the pan-European comparison, both in the case of rents and sales. Moreover, the forecasts do not show that the situation should improve significantly. Rather the opposite,” explains Hlavsová.

This may have significant effects on the situation of seniors in the future. “If the share of people who live primarily in rented accommodation increases – for which there are reasons – this may lead to more pensioners at risk of poverty due to the high costs associated primarily with housing,” outlines Janský.