Association of Pension Companies of the Czech Republic (APFCR) president, Ales Poklop, discusses recent and upcoming changes to the Czech pension system

When we saw 2023 was a record year for pension savings – as equity pension funds earned investors an average yield of over 20 per cent and the best of them even yielded 30 per cent – I really did not expect that a year later I would be able to talk about double digits again. But that’s the reality and I am extremely pleased.

The best-performing equity funds, which we call dynamic funds, yielded an excellent 33 per cent for 2024. If we look at the returns of these dynamic funds in the past year as an average value, the figure is 12.54 per cent. Next came balanced funds with a return of 7.32 per cent (these investment funds contain an equity component and a bond component), and conservative funds investing only in bonds closed last year with an appreciation of 3.41 per cent.

Although dynamic funds involve more risk than balanced and conservative funds, their long-term appreciation is proving to be the strongest argument for their use as an old-age investment. When a potential investor maps out the entire financial market and all the products available, they will quickly discover you also receive a state contribution of 20 per cent of what you invest each month, as well as substantial tax deductions and other benefits. That’s a pension savings scheme that will truly prove to be the right tool for building a long-term reserve, with the advantage of simplicity and almost no management required.

In fact, the funds are set up so anyone can take care of their financial planning for the future. Furthermore, people will be able to try something completely new this year. The law allowed for the creation of so-called alternative funds that can invest in real estate, public infrastructure, cryptocurrencies, commodities, and private equity. This innovation opens opportunities for bolder investment strategies. The first alternative funds launched in January 2025 and seven of nine pension companies in Czechia are expected to offer them.

The second investment novelty (which hasn’t been launched yet but is very likely to come later this year), will be an expansion of investment options for existing funds into rental and affordable housing. This new area could especially be used by balanced funds. The Finance Ministry is reportedly considering this change.

Another positive change being considered by the ministry is the method of compulsory employer contributions for employees working under difficult conditions (category III). Employer contributions are an important factor in the final amount of pension savings. Any greater involvement by employers is therefore welcomed by the APFCR.

After last year’s legislative changes, the pensions segment with a total of four million investors is seeing conservative pension savings being rapidly abandoned, while new schemes with equity investment options are seeing record numbers. The two trends are linked because people are changing from the old to the new system. In previous years, the normal number of people moving from the old scheme to the new one was around 30,000. But last year it was almost 200,000. This is also due to a new option: The ability to switch new pension schemes and pension companies without having to switch to a new scheme with their current pension company first.

I believe that 2025 will be a year of consolidation in pension savings after the large number of changes, as well as a year of increasing monthly contributions by investors, rejuvenating the entire industry. Above all, it will be another year that will bring great value for clients.

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