The Czech pension reform proposal to reduce pension management fees to 0.5 per cent would fail to cover costs and could also lead to “market paralysis”, according to Association of Pension Companies of the Czech Republic (APS ČR) spokesperson, Jan Sedláček.

The Ministry of Finance has presented a proposal for pension reform, including changes to the fees charged to pension companies, with the result expected to be a uniform fee of 0.5 per cent of assets under management.

The reforms form part of wider efforts to boost participation in retirement savings among younger people and improve long-term returns for pension savers.

However, APS ČR cited data from an independent study by EY, which recently set the real costs of pension companies at 0.82 per cent. Despite this, APS ČR noted that Minister of Finance, Alena Schillerová, “still wants to reduce fees well below this limit”.

It argued that the proposed fee cap will, among other things, have a significant impact on the (non)acquisition of new clients.

The organisation added that the 0.5 per cent fee will not cover costs, and it will not be profitable for pension companies to recruit new participants into pension plans. Yet, APS ČR noted that this is the sole source of income for pension companies.

This is not an opinion only held by APS ČR, as according to reports in the Czech newspaper e15, pension providers intend to challenge proposals put forward by Schillerová.

Schillerová wants to introduce the new law next year, and APS ČR said that she does not believe that pension companies will have to invest their clients' money more conservatively.

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