Czech pension companies are set to object to proposed fee reductions in the government's planned "Better Pension" reforms, warning that the changes could make pension savings economically unsustainable.

According to reports in the Czech newspaper e15, pension providers intend to challenge proposals put forward by Minister of Finance, Alena Schillerová, which would reduce pension management fees to 0.5 per cent.

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, pension companies argue that the proposed fee level would not cover the costs of operating pension products and could discourage providers from attracting new customers.

Data cited by the Association of Pension Companies of the Czech Republic (APS ČR) suggests pension providers' costs averaged around 1 per cent of assets in supplementary pension savings schemes last year, with profitability supported by performance-based fees linked to investment returns.

While providers are reportedly willing to accept the abolition of the current performance fee, which can amount to up to 15 per cent of investment gains, they have argued that the existing asset management fee of up to 1 per cent should be retained or only reduced gradually.

APS ČR spokesperson, Jan Sedláček, said the government's assumption that lower fees could be offset by an influx of younger savers was flawed.

"It may take many years before the influx effect becomes apparent," he told e15.

"In the case of the proposed fee of 0.5 per cent, it would not make sense for pension companies to acquire new clients, because with each one of them, their financial loss would only deepen."

The government has argued that lower fees are necessary if state support for pension saving is to deliver better outcomes for participants.

Launching the reforms, Schillerová said participants currently pay an average of CZK 2,500 a year in management and performance fees, adding that the changes would reduce this to around CZK 500.

Schillerová added that the package could leave participants with more than CZK 1m extra after 35 years of saving.

The government is also seeking to increase participation among younger savers, with around 430,000 people under 30 currently enrolled in pension savings products.

The long-term objective is to increase that figure to around one million participants.

Yet APS ČR chair, Radek Moc, warned that the proposed reforms could have a particularly significant impact on smaller pension providers.

Pension companies are expected to submit their objections during the formal consultation process, which is due to conclude later this month.

Despite the anticipated opposition, Schillerová indicated that the government is not obliged to accept the industry's recommendations, while Prime Minister, Andrej Babiš, has publicly defended the proposed reductions, arguing that current fee levels remain too high.

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