Pension entitlements

The Czech pension system consists of two parts. The main part, forming the first pillar, is mandatory basic pension insurance, defined by benefits, funded on a running basis (pay-as-you-go system) and administered by the state. In this system, pensioners receive a pension from the state, while the state obtains funds to finance the pension from existing employees, who pay part of their wages to pension insurance. The second part is the so-called third pillar of pension insurance, which is provided by pension companies and the pension funds managed by them, and is on a voluntary basis. It is a way of saving for old age, supported by the state in the form of contributions and tax allowances. The goal is to obtain another source of income in retirement age in addition to the already mentioned state pension. Pension entitlements of the third pension pillar, which represent only 3 % of the total value of entitlements at a stable level, are recorded in the national accounts and do not need to be modeled.