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Investor Presentaiton

OECD Recommendations to simplify the benefit formula while maintaining the reference to wages through the whole career Calculate earnings-related entitlements using a constant effective accrual rate across earnings levels (up to a ceiling). Adjust then the basic pension level to achieve redistribution objectives At least, remove the double penalty related to the impact of non-validated periods on pensions • • Each insured individual would know the acquired entitlements in every period, which would be easily calculated Proposals by the Fair Pension Commission in January 2020 (triple the basic pension level and constant effective accrual rate of 0.39%) would greatly simplify and go a long way in mimicking the current pension formula (see Figure 1.30) at retirement There might be some significant impact during retirement due to indexation Alternative: convert pension in CZK at retirement and follow the indexation rule The Commission proposals imply a high level of basic pension and a low level of accruals in international comparison, consistent with maintaining high progressivity With constant spending, progressivity can be increased (reduced) through a higher (lower) basic pension and a lower (higher) constant accrual rate 11
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