How the Czech Pension System Works: A Guide for Expats

Living and working in the Czech Republic means you're likely contributing to the local pension system—whether you realize it or not. While it may not be top of mind when settling into expat life, understanding how the Czech pension system works is essential for long-term planning. Whether you're here for a few years or considering staying permanently, your pension contributions can add up over time—and can still benefit you even if you leave.

Czechia’s pension system is made up of three distinct pillars, each with its own structure, purpose, and set of rules. As an expat, you may interact with one or all of them depending on your employment status, how long you stay, and whether you choose to supplement your future retirement income. This guide gives you a clear overview of what you need to know.

Who Is Eligible for the Czech Pension System?

If you are legally working in the Czech Republic—whether as an employee or a self-employed person—you are likely already participating in the Czech pension system. Social security contributions, which include pension insurance, are deducted automatically from your salary: 6.5% is paid by you, and 21.5% by your employer, for a total of 28% of your gross income.

Self-employed individuals must also contribute, though the calculation is different and based on reported profit. Contributions to the state pension system are mandatory unless you're working under specific short-term exemptions.

If you're an EU/EEA or Swiss citizen, your contributions are coordinated across countries. That means your work periods in different member states can be combined to determine eligibility and pension amounts. For non-EU citizens, it depends on whether your home country has a bilateral social security agreement with Czechia—many do, including the United States, Canada, and Australia.

The Three Pillars of the Czech Pension System

Pillar I – The State Pension (Mandatory)

The first and most important pillar is the state pension, funded by mandatory social security contributions. To qualify for an old-age pension, you must generally meet two criteria:

1. Retirement age – This is currently 65 for those born in 1965 or later (and gradually rising in line with life expectancy).

2. Insurance period – You need to have paid into the system for at least 35 years. A reduced pension may be available with 20–34 years of contributions.

The amount you receive depends on the length of your insurance period and your historical earnings. It includes a basic amount (currently around CZK 2,900 per month) and a percentage-based part calculated from your income history. In general, however, the Czech state pension alone is not enough to provide a comfortable retirement—hence the importance of the other pillars.

Pillar II – Abolished in 2016

The second pillar was introduced in 2013 as a semi-private savings scheme where participants could voluntarily redirect part of their social security contributions into private accounts. It was discontinued in 2016 due to limited participation and political changes. Today, it no longer plays a role for new contributors, but those who previously participated had their funds transferred or refunded.

Pillar III – Voluntary Private Pension Savings (DPS + DIP)

The third pillar is a voluntary system designed to supplement state pensions. It includes Doplňkové penzijní spoření (DPS) and, since 2024, a new investment option called Dlouhodobý investiční produkt (DIP).

DPS allows you to make monthly contributions to a licensed pension provider, and the government matches up to CZK 340 per month if you contribute at least CZK 1,700. In addition, you can deduct up to CZK 48,000 per year from your taxable income, giving this plan strong tax benefits.

Another major advantage is that many employers in Czechia contribute to their employees' DPS accounts, often offering monthly bonuses as part of a benefits package. Some forward-thinking companies are also starting to contribute to DIP plans, especially for international staff.

You must maintain the DPS plan for at least 120 months (10 years), and you can begin withdrawing from it at age 60. If you withdraw early, you’ll lose the state contributions and may pay tax penalties, so this is meant to be a long-term savings product.

DIP, introduced in 2024, offers more flexible investment options compared to DPS. It is ideal for those who want to diversify their long-term retirement savings using ETFs, mutual funds, or bonds, while still benefiting from tax deductions up to CZK 48,000 per year. However, it’s important to note that this CZK 48,000 limit is shared between DPS and DIP—it’s the total amount you can deduct across both products combined in a single tax year. DIP is not linked to a pension provider and can be set up through a broader range of financial institutions. It’s designed for individuals who prefer more control over their investment strategy.

What Happens If You Leave Czechia?

If you leave the country before reaching retirement age, your contributions to the first pillar don’t simply disappear. EU/EEA citizens can combine their years in Czechia with contributions in other countries under EU coordination rules. When you reach retirement age, each country pays a share of your pension based on how long you contributed there.

If you're from a non-EU country, your ability to claim a Czech pension later depends on bilateral agreements. Many such agreements exist and allow for a proportional Czech pension to be paid abroad when you reach retirement age.

As for the third pillar, the good news is that you can keep your DPS or DIP account even after leaving. As long as you've held the plan for at least 10 years, and you're over 60, you can withdraw your funds—even if you live abroad at that time. This makes DPS and DIP valuable tools for building globally mobile retirement savings with Czech state support.

Practical Advice for Expats

• Check your payslip or ask your employer whether you’re contributing to the state pension and whether they offer DPS or DIP benefits.

• Track your contributions via the online portal of the Czech Social Security Administration (ČSSZ).

• Consider opening a DPS or DIP account, especially if you plan to stay in Czechia more than a few years or want to benefit from tax relief and state support.

• Keep records of all contributions and pension plans in case you need to file claims from abroad in the future.

• Talk to a financial advisor (like me) who understands the Czech pension landscape.

Final Thoughts

The Czech pension system may seem complex at first glance, but it offers structure, flexibility, and long-term value—especially for expats who take the time to understand it. Whether you're staying long-term or eventually moving on, your contributions here don’t go to waste. With a bit of planning, the Czech system can become a valuable part of your global retirement strategy.

If you're unsure which pension program is best for your situation, I’d be happy to help. I offer personalised support to help you choose the best DPS or DIP providers on the market, set up your plan, and answer any questions you may have along the way.

👉 Ready to secure your future? Let’s make your pension work for you.