9 January, 2020

A new pension law amendment – positive changes to the pension system?

With the new year, a pension law amendment has come into force, which brings many positive changes to the pension system. One of the main goals of the amendment is to increase the employment activity of older workers through favourable measures or reward it accordingly. The measures to pursue the stated goal are presented below.

The most prominent and most frequently mentioned measure in the media to reward work activity is that, if the conditions for retirement are fulfilled, the additional three years of employment are valued at three percent annually (or 1.5 percent each 6 months).

The amendment also establishes modified arrangements for combining job status with retirement status by changing the arrangements for receiving a partial pension while extending full-time employment. Persons covered by compulsory insurance for full-time work who qualify for retirement will be able to apply for a 40 percent retirement pension. This part will be paid to them for three years and then the pay-out will drop to 20 percent.

With regard to the above measure, it should be emphasized that persons who qualify for early retirement will no longer be entitled to payment of part of their pension. The exception to this is that only those insured persons who receive part of their pension in accordance with the legislation in force, which provides for special transitional arrangements for them.

To current recipients of a 20 percent retirement pension who choose to continue working, the pension institution will ex officio recalculate a portion of the retirement pension to 40 percent. Additional task of the institution is to verify that the recipients of a partial early retirement pension qualify for a pension of 40 percent of the retirement pension and issue a decision accordingly.

Compared to the previous arrangements, a new feature represents the arrangement, which, in addition to full inclusion in insurance, encourages inclusion in compulsory part-time working or insurance time (at least four hours a day or 20 hours a week). In addition to a partial pension or a proportionate part of the pension, such an individual will also be entitled to the payment of a proportionate part of the 40 percent retirement pension.

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