The government is currently debating an amendment that would introduce a new retirement savings product called the “Long-Term Investment Product.” The amendment will probably take effect on 1 January 2024. This innovative product will enable investment in the third pension pillar and provide further appreciation of money through state-supported investments.

It will be possible to invest for example in stocks, bonds, shares in investment funds and other assets that can provide participants with higher appreciation, but are also associated with higher risk of depreciation. Only statutory financial institutions such as banks, credit unions, investment companies and others will be able to provide long-term investment products.

Same as in the past, the possibility of tax benefits for participants will remain. Instead of the current limits for deduction from the tax base for contributions to pension insurance and private life insurance of CZK 24,000 per year for each product separately, taxpayers will now be able to deduct from the tax base all contributions to supported retirement savings products, including the proposed long-term investment product, up to a single limit of CZK 48,000 per year. In order for this tax support to be granted, the statutory condition of duration must be met for all products, which will be extended from the current 60 months to 120 months.

In order to motivate participants to increase their contributions, the amendment will also increase the lower and upper limits for obtaining a state contribution when investing in pension funds. The lower limit will probably be increased from the current CZK 300 to CZK 500 per month and the upper limit from CZK 1,000 to CZK 1,700 per month. At the same time, the amount of the state contribution may change to a linear 20% of the participant’s contribution. Participants who have already been granted a retirement pension or are over 65 years of age will no longer receive the state contribution.

In addition to the above-mentioned product, a new type of fund in supplementary pension savings is also being prepared – the so-called alternative participant fund, where the fee policy and investment strategy will be somewhat freer than in the current participant funds. This should help participants achieve greater appreciation through more dynamic investment by pension companies.

Author: Roman Burnus, Anna Beránková