Although the number of younger Czech's saving for retirement is growing "rapidly", the majority of younger people are failing to make the most of their pension savings, research from the Czech Republic's Association of Pension Companies (APS) has found.

An Ipsos survey, commissioned by APS, revealed that the number of participants in the 18-26 age group saving for retirement had doubled between 2019 and 2024 to 162,500, while for 27-35 year olds it increased from 146,000 to 338,500. 

Behaviour trends have also shifted since the state contribution was increased to CZK 340 for deposits of CZK 1,700 per month, as this amount has since become the standard.

In addition to this, both age groups are now twice as likely to choose dynamic funds as balanced ones.

However, the survey found that knowledge surrounding pensions is "surprisingly incomplete" as less than three-quarters (70 per cent) of those surveyed said they know how the product works.

Understanding was even weaker amongst those in the new pension system, as only half knew that their money could also be invested in stocks.

Wider investment knowledge was also lacking, as more than 60 per cent of respondents were unfamiliar with the concept of compound interest, while two-fifths were unaware of the option of reducing their tax base by up to CZK 48,000 per year.

In addition to this, one-fifth of younger people had no idea that they could change their investment strategy.

In the full research, seen initially by Seznam Zprávy, the APS acknowledged that some people have the idea that pension savings do not earn them money and have high fees.

According to a report from SZ Byznys, however, this applies mainly to the old pension insurance with a no-loss guarantee, whilst for the new pension savings, the fees are capped and comparable to other equity funds.

The report suggested that this lack of understanding, rather than a lack of motivation, is what is holding younger people back from saving more, as it found that eight out of ten young people would welcome the product if the state contributed 20 percent of the deposit, and a similar number would want it if the appreciation exceeded five per cent per year.

However, both these conditions already exist, as the state does indeed add 20 per cent to the monthly deposit, and dynamic funds have often exceeded the five per cent yield in recent years.

The findings have prompted concern, as recent demographic developments in the Czech Republic showed that the strong generation of current payers to the first pillar, from which old-age pensions are drawn, will soon become a group of beneficiaries, and the following generations are not on track to meet the first pillar with their social contributions.

Given this, it is expected that Czechs will have to rely more on their own savings in the future, because the amount of state pensions will decrease.

And whilst the research found that a growing number of younger savers are investing in pensions to secure their financial future (24.7 per cent), broader concerns persist, as less than a quarter are saving into stocks or exchange-traded funds (23.6 per cent and 12.5 per cent, respectively).

In addition to this, 11.7 were instead choosing to hang their retirement hopes on cryptocurrency, while 5.3 per cent said they didn't have a financial reserve at all.

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