CZECH REPUBLIC - The International Monetary Fund and a pensions reform committee are now discussing plans to rethink the Czech Republic's second pillar pensions regime.

In another evaluation of the Czech pension system, the IMF noted: "Given the impact of financial market developments, accounting rules for pension funds and insurance companies were amended in 2009 to allow them to value as hold-to-maturity, rather than marked-to-market, on their government-bond holdings for up to 30% of their portfolios".

Second pillar pension assets increased from CZK186bn (€7.26bn) at the end of 2008 to CZK200bn over the year.

However, the IMF pointed out that with "current assets worth only about 5% of GDP", second pillar funds "remain at an early stage of asset accumulation and function largely as a state subsidised savings scheme rather than as retirement savings".

The international organisation renewed its calls to grow the funded second pillar system and added while "authorities welcomed this proposal" it remained a sensitive political issue as "neither of the major political parties has made any strong commitment yet" on this issue. (See earlier IPE story: IMF tells Czechs to grow the second pillar)

Meanwhile, a pension reform commission reinstated by the government in January, and holding a limited mandate until  the end of June, has met to discuss the demographic outlook for the Czech Republic, and unsurprisingly shows there are major challenges for the first pillar pensions system.

The commission, known as the Bezdek Committee in 2004 and 2005, again contains Vladimir Bezdek as one of its officials, albeit he is now no longer a representative of the National Bank but as head of the Aegon pension fund. (See earlier IPE article: Stalemate in Prague)

Also sitting on the commission are the head of the Czech pension fund association, Jiri Rusnok, Jiri Fialka from Deloitte, as well as government and trade union representatives.

Bezdek said there have been "only preliminary documents" available on the first committee meetings so far.

The IMF stressed in its latest study that the Czech Republic should consider "some degree of mandatory participation in a funded second pillar pension system" as there is a danger wealthy people opting out of the first pillar and destabilising the system further.

Figures just released also showed the 10 funds in the Czech second pillar pensions regime posted an average return of 1.46% in 2009.

Returns ranged from 0% for Aegon, the youngest fund in the system, to 2.8% by Generali and 3.4% by Allianz.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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