Draft report (Frans Willekens, 30 May 2004)
The seminar was officially opened on the evening of 27 May. The opening ceremony, including a reception, took place in the Botanical Garden of Charles University, Na Slupi 16, Prague 2.
The seminar started on 28 May at 8:30 hours, see programme (below).
The main question addressed during the seminar was: “What are the major demographic changes confronting the Czech Republic today and in the foreseeable future, and how does society (government and private sector) respond?” The focus was on financial aspects and included collective and private schemes.
The demography of the Czech Republic is characterised by very low fertility (TFR 1.13) and declining mortality (life expectancy of 72 years for males and 78 years for females). Immigration is about 34,000 annually. Fertility is expected to increase a little. Burcin and Kucera (2003) expect that the TFR will increase to 1.34 in 2010 and 1.57 in 2030. The Czech Statistical Office (CSU) (1999) expects a TFR of 1.32 in 2010 and 1.50 in 2030.
Burcin and Kucera expect the life expectancy of males to increase to 74 years in 2010 and 79 years in 2030 (medium variant). The life expectancy of females is expected to increase to 80 years in 2010 and 84 years in 2030 (medium variant). The Statistical Office is less optimistic (males: 74 in 2010 and 75 in 2030; females: 80.5 in 2010 and 81.5 in 2030). Net (im)migration is expected to vary between 10 and 13 thousand.
As a result of these processes, the total population (currently at 10.3 million) will decrease to about 10 million in 2030 (medium variant). The population of productive age is expected to decrease substantially from the present 6.7 million to somewhere between 3.7 and 4.7 million (a decrease by 2 to 3 million between 2000 and 2050!). The share of the population of productive age will decrease from 76 percent in 2000 to 56 percent in 2030 and 47 percent in 2050. The number of senior citizens (60+) will increase from 1.9 million in 2000 (18 percent) to about 3.7 million in 2050 (41 percent). The ageing scenario indicates the presence of one senior citizen for every person of productive age (2050) (stressed by mr. Chalupa in his presentation).
Pension systems are not sustainable under these demographic regimes. The current pension system is a Pay-As-You-Go (PAYG) system that gives a basic pension to everyone (Pillar I). A fully funded system (Pillar II) that is based on capitalization of savings is beginning to develop. The Association of Pension Funds of the Czech Republic (APF), which was represented at the meeting by its president Ing. Jan Chalupa, includes 12 pension funds with a total of 2.7 million insured by the end of 2003 and total assets of 77 billion CZK (Czech Krones) (which equals about 2.5 billion EUR). The number of persons with supplementary insurance (pension) is increasing by an average rate of 10 percent per year.
Mr. Mertlik, Chief Economist at the Raiffeisenbank, indicated that the PAYG system is not suitable for a decreasing population. In the Czech Republic, changes are slow, however.
Mr. Král, Director of the Social Security Division of the Ministry of Labour and Social Affairs, also stressed the slow pension reforms in the Czech Republic, although ‘The speed of ageing in CZ will be the highest in Europe.’ He discussed the two pension schemes: the mandatory scheme (Pillar I) and the private scheme or voluntary pension (Pillar II). He also explained the increase in retirement age from the current (2004) value of 61.4 for men, 60 for women without children and 58 for women with 2 children. Only two countries in the world, CZ and Cuba, have chosen for an official retirement age for women that depends on the number of children (Cuba had Czech advisors). The retirement age is currently on the increase with a few months per year.
Mr. Rusnok, Executive Advisor to the Management Committee of ING, advocated the view that children should be viewed as investment. As a result, couples without children should contribute more to the pension system. A trade-off should be introduced between having children and contribution to pension. The details were not clear but they will be published in the coming weeks (ING report).
Mr. Betak, Director of Life Insurance at ING, reported that the life insurance premiums total 3.5 billion EUR annually. The major issue is life expectancy (longevity). Insurance companies are experimenting with life tables that no longer differentiate between males and females.
Mr. Chalupa, Chairman of the Board of Directors, Credit Suisse Life and Pensions, and President of the Association of Pension Funds of the Czech Republic, called for diversification of pension schemes. The heavy reliance on PAYG in CZ is not sustainable. Capitalization of savings is one direction. Information campaigns are needed to create awareness that one should start early in life accumulating pension rights. Today, the minimum age at entry into a pension scheme is 18 years. Many parents are willing and able to enrol their children at a younger age.
Demographers of the Department of Demography and Geodemography presented population and household projections for the Czech Republic.
The seminar was a great success. The presentations were of high level and the attendance was good. The Department of Demography and Geodemography was represented by senior and junior staff and students (including prof. Pavlik and the Head of Department, Jitka Rychtarikova).