H55 - Social Security and Public PensionsReturn

The purpose of this article is to evaluate the subjective impact of provided care on the quality of life of informal carers, to assess the institution of long-term carer's allowances from the viewpoint of informal carers, and to identify additional social policy tools that could, in carers' opinion, improve the provision of care. Our research shows that provision of care leads to a reduced quality of life for a significant number of respondents. It is confirmed that respondents' welfare is negatively influenced by a lack of funding and weak development of social services. It is not proven that the long-term carer's allowance is a comprehensible benefit increasing the carers' quality of life providing enough motivation to care. This sickness insurance benefit is intended primarily for a temporary lack of self-sufficiency, with the prospect of future improvement. Long-term or permanent lack of self-sufficiency and the related care must be secured by social support and assistance mechanisms, including respite care, and ought to be funded outside the framework of sickness insurance.

The article analyses the relationship between population ageing and sustainability of the EU countries' pension systems, and assesses how this relationship is affected by pension system design and parameters. The findings show that there is a link between population ageing and unsustainability of pension systems; however, there are exceptions in both directions. Despite the significant problem of population ageing, pension systems of some countries are found to be sustainable and vice versa. The elements enhancing sustainability are, for example, hypothetical defined contribution accounts or linking the pension benefit or retirement age to demographic changes. The article also analyses the relative significance of population ageing determinants. Life expectancy appears to be the most significant determinant of population ageing.

Czech society is ageing, and the availability of these services should be important part of social strategy for the Czech Republic. Thus, the development in this area is not optimal and much more attention should be put on. Increasing life expectancy cause not only higher demands on the pension systems but also higher demands on social services. This is emphasised by the slower increase of healthy life expectancy and therefore it can be assumed that more people in higher age will require more social services. The paper deals with the issue of the macroeconomic costs and benefits of satisfying the requirements for residential care activities, especially for homes for the elderly as one of the most important area of social care. The aim of the paper is to estimate overall direct and indirect macroeconomic effects for the Czech Republic at the level of the regions. The relation between demand and supply of residential care activities is illustrated for 2013. While some issues can simply be related to the Czech population as a whole, some estimates are presented at the regional level. Economic impacts on the gross domestic product, employment and government finance are estimated by the semi-dynamic input-output analysis. It is illustrated how the investments into social facilities are transformed into economic development with different regional scale.

Component encouraging private savings was introduced or is under consideration in pension schemes of many countries. This diversification of old-age income sources shifts the responsibility for the level of retirement income to the individuals themselves and, at the same time, opens the question about their preparedness for such financial decisions. Inadequate savings could have enormous impact on their future life and determine their standard of living in the period of retirement. The aim of the paper is to identify key demographic and socio-economic factors determining individuals' proactive approach to the private pension savings. We also would like to point out group of individuals with a low level of the private savings involvement. These individuals are potentially poverty vulnerable in their old-age. Using representative sample of 2 826 citizens of the Slovak Republic from the Household Finance and Consumption Survey carried out by the National Bank of Slovakia, we have identified as key factors age, education, income, ownership of second real estate and other financial assets and sharing household with pensioners. Our research contributes to the extension of existing knowledge that can be used by countries with multi-pillar pension systems, absence of occupational employment funds and low availability of products for voluntary pension savings.

This article analyses the options how changes in Czech tax-benefit system could increase mother´s economic activity. The article builds up on the study (previous author´s study published in 2015). This underlying study presents a calculation according to which women, taking care of children up to 3 years, results with a lower net cash flow after returning to work compare to staying at home. The aim is to propose measures that would motivate women, with children up to 3 years, to return to work and simultaneously quantify the impact of these measures on the state budget. Economic effects of the proposed measures are quantified, including the cancelation of conditional entitlement to parental benefit, introduction of tax relief for working mothers and 50% relief on employer's mandatory contributions, which employ parents part-time. Implementation of these measures, which would motivate more women to return to work, would bring an estimated net income amounting to 9.5 billion crowns to the state budget per year.

This article addresses the issue of the relationship of parenthood, employment and economic inactivity of childcare holders. It focuses on the mother's motivation to work in the context of Czech social policy measures. The aim is to empirically verify the willingness of women, taking care of children under three years old, to return to work. The decision of mothers, about their participation the labour market, is analysed by indicator "Effective cost of return to work" and by using sensitivity analysis. Negative net fi nancial effect of return to work was identifi ed for all studied regions and types of workloads. These results demonstrate clearly that mothers, entering the labour market, are confronted with very high additional costs. These costs would not be covered by their employment income and other received benefi ts. Estimated amount of potential wage, which would encourage women to return to work, reach in some cases up to four times the median wage of women in the particular region.

The article analyzes the possible impacts of the fully-funded (FF) pension system (the so-called Chilean model), which was introduced in the Czech Republic in 2012, on future pensions of contributors to the system and on state expenditures related to the pension system reform. The author performed calculations for 3 model examples of individuals who would participate solely in the FF and also of individuals who would contribute to both the pay-as-you-go (PAYG) and the FF during their lives. The calculations in all model examples were made for 4 average real annual interest rates and for 4 standardised income levels. The income replacement rates of the examined individuals were compared with the existing PAYG and with a hypothetical balanced PAYG. The aim was to determine the minimum rate of the pension funds' appreciation from whichthe transition to the FF would be profi table for all examined individuals. The article also attempts to identify the duration of the transition period, the moment after which the FF would become budget-neutral, and the approximate cost of the transition process.

General elections in Chile in the autumn of 2013 have unleashed a discussion about the shortcomings of the Chilean pension system and the necessary changes. Radical solutions contains various forms of return of the PAYG system. The paper deals with the preparation and the main implication of the pension reform in 1981 which led to the transition from the PAYG system to the capital system. Thanks to the reconstruction of the time series from the 70s and 80s of the 20th century using the latest data from 2013 and own calculations the article confirmed that the transition meant a noticeable increase in pensions for everybody included in the system. This outcome is driven mainly by the lower tax burden, generated savings and positive impact, particularly on the country's GDP and government budget. The paper also summarize the available knowledge about the pension reform in Chile in the Czech language.

The article evaluates the distributional impacts of the value added tax changes in the Czech Republic using the Household Budget Survey, a representative sample of approximately 3000 households. It evaluates the impacts on the living standards both for the VAT reform that was actually approved in 2011, as well as for alternative reform proposals that were discussed during 2011 and that also considered a reduction in payroll tax rates. The estimates refl ect the recent empirical fi ndings about the incidence of consumption and payroll taxes. Unifying the VAT at a single tax rate has an almost proportional impact on the households from the 2nd to impact 10th income decile while having a disproportionately larger impact on the poorest decile. A reduction in the payroll tax would have reduced the progressivity of the tax system across the entire income range.

Aging population and fiscal costs of the pension system is a burden for the sustainability of public finance. Therefore, many countries have been forced to reform their pension systems. One of the many ways of doing this is to switch from the convention pay-as-you-go system to capital funding. This paper explores the present Slovakia's Pension system and its impact on public finance from the long-term perspective. This article points out that the authorities have to be committed to bringing public finance to a sustainable path. In this regard, a financial consolidation of the pension system would be needed. Therefore, the paper suggests some alternatives of the mixed pension system.

Non-contributory periods is one of the key issues in the public discussion on the planned reform of the pension system in the Czech Republic. This article focuses on a detailed analysis of non-contributory periods in the Czech pension system and their impact on pension system balance and micro and macro economic connections. The extent of non-contributory periods considered in the pension system represents one of the theoretical possibilities of parametric changes to the pension insurance system. The amount of non-contributory periods or the proportion between non-contributory periods and years worked, or the proportion between paid insurance and non-contributory periods (potential loss of insurance contributions) has, to date, merely been estimated in the Czech Republic. The study presents the first accurate figures, based on unique individual data on insured persons. The analysis reveals that non-contributory periods are a significant element of the Czech pension system amounting to 22.4% of the total insurance period. The average duration of non-contributory periods for current pensioners is 8.7 years.

The paper deals with a wide-spread myth that a switch from a PAYG to a funded pension system might solve adverse consequences of the population aging. It is shown, that under additional assumptions the pension debt (which is created during the process of the switch) is exactly equal to the value of assets that the pension funds accumulate. These additional assumptions are following: government imposes additional taxes, which are equal to the difference between the contributions to the former PAYG system and the contributions to the pension funds. Therefore workers contribute less to the pension funds but if the additional taxes are taken into account, they continue paying the same amount. It is shown, that if the additional taxes were permanently lower than what is supposed, the pension debt would grow beyond any limits. The other additional assumption made is that the interest rate paid by government from its pension debt is the same as the interest rate reached by the funds. If this assumption is relaxed, the qualitative conclusions do not change. Hence, demographic development cannot be used as an argument in favour of a switch of the pension system.

The Czech Republic is going to face ageing of its population. It will affect the economy in many ways. The pension system is one of them. This paper provides a view on possibilities how to insure long-term stability of the pension system in the Czech Republic using a mix of pay-as-you-go and fully funded system. Simulations are based on OLG model, long-term demographic forecast and limits of fiscal policy stemming from the necessity to fulfill Maastricht criteria and The Stability and Growth Pact. Those obligations creates a frontier for plausible solutions. Results suggest that it is possible to find a solution for mixed system providing more favorable conditions than purely parametric changes of PAYG. Taking into account fiscal limits, the contribution rate to the FF pillar would be similar to the rates in other CEE countries where pension reform already started.

This essay focuses on the pension system and highlights some of its key elements. The first part deals with the economic principles connected with the social security system. Eatwell's model is utilized to give some basic intuition of terms and concepts used in the pension reform discussion. The second part classifies pension systems from different perspectives and discusses some of the factors relevant for the Czech reform effort. The last part brings the main arguments of the pay-as-you-go supporters that seem to be missing in the current Czech debate. The aim of the authors is to show that a pension reform is a rather complex problem where no fast, simple and impartial view solutions exist. Rather than giving any particular recommendations, the authors try to stimulate the current pension reform debate by stating some controversial issues.

The long-term sustainability of the public finance in the context of population ageing is becoming a hot topic in most of the European countries including the Czech Republic. Moreover the Czech population will be one of the oldest in the world according to the forecasts of different institutions (UN, OECD, etc.). It poses challenge for the Czech pension security scheme. This paper presents possible scenarios of the future development and illustrates future fiscal impacts of the ageing assuming a preservation of the current Czech pension security scheme in the period up to 2050. The analysis is based on a detailed one-year age structure. This allows us to simulate the influence of the changes in component parameters of the current scheme on its future situation (for example, changes in retirement age limits). The main conclusion is that there is a rather small impact of these parameters changes on the expected future imbalance of the Czech pension system. Therefore a more fundamental reform of the current pension system should be considered.