Research (Conseq)
Pension insurance  |  December 05, 2012 11:06:18

The evaluation of pension reform is too early

"Pension reform will not succeed, a survey showed." So look contemporary reports in the media.

Pension reform not start until the beginning of the year and its evaluation is therefore too early. Especially when one considers that this is a reform targeting the state's finances in the next decades.

If we want to say that something is wrong, it is especially communication of government officials on the subject, which is securely pushed marked negative campaigns. The reader of a newspaper roll red headlines.But they do not preach that the State for the payment of pensions in the not so distant future, and without further tax increases will have, but shouting slogans such as tunneling or nationalization when the government gets the opposition. The main content is something in the way - why should you save for the future, when we can spend your money today?

It is not logical thing that the Czech conservative savers, confused from the whole amount of all kinds of pillars, has led to the idea of entering into a new system. Not so surprising that the polls indicated participation is on a fraction of that originally planned.

The truth is that the start of the reform does not come at the most opportune time - cyclical downturn in the economy, deeper austerity program, great impact on Czech households. Rising prices of food, fuel and energy, combined with a fall in real wages (as Q3 2012 -1.8%), and the median income at about 21,000 CZK leave too free resources for long-term "mandatory" savings. The delay would be difficult but the condition improved.

However, it is important to realize that for people of working age is a decision to remain only in the first pillar only certainty - low future income and a decline in living standards in old age. Long-term creation of own resources II. and especially in III. pillar (albeit in small monthly depositing, but also with the state or employer support) is the only correct approach in connection therewith should not talk about nationalization and tunneling, but obvious.

Aptly commented on the problem Prime Minister Necas: "The performance of colleagues from social democracy is clear that alternatives to pension reform is to do nothing, bury our heads in the sand and do the kind of pension aircraft." Supporters aviation so if it worked out privatization of CSA, not sad . One aircraft that still remains. His eventual downfall but would be disastrous.


John Schiller

Portfolio Manager

Conseq Investment Management, Inc.


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