Pension system reform: Bills on New Laws to Introduce Pension Funds as II. Pillar of Czech Pension System rejected by the Upper Chamber of Parliament
On 12 October 2011, the Upper Chamber of Parliament rejected Bills to introduce new laws significantly reforming the current pension system in the Czech Republic. According to the Bills, the current pay-as-you-go system (I.pillar of the pension system) would be supported by a newly created II. pillar. The II. pillar would consist of private pension fund companies created either by the transformation of the currently existing pension funds providing supplementary pension insurance with state contribution, or by establishing completely new pension fund companies. Each pension fund company would need to offer 4 types of pension funds (with different investment limits, structure of portfolio and associated risk): standard pension fund; conservation pension fund; balanced pension fund; and dynamic pension fund. Participation in the second pillar would be voluntary. As a next step, the Lower Chamber of Parliament will re-vote on the Bills. To overturn the Upper Chamber’s rejection of the Bills, the Lower Chamber would have to approve the Bills by a qualified majority of votes.
Bills to implement Omnibus I Directive submitted by Government to Parliament
On 13 October 2011, the Government submitted to the Lower Chamber of Parliament Bills to amend various laws on financial markets, including banking, insurance, capital markets and investment laws. The main objective of the Bills is to implement Directive 2010/78/EU in respect of the powers of the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority (the “Omnibus I Directive”) into Czech law. As a result of the Bills, competencies of the Czech National Bank, as the Czech financial markets regulator, would be amended to be in compliance to requirements stipulated in the Omnibus I Directive.
Bill to amend the Act on Insurance Intermediaries discussed by the Government
In October 2011, the Government continued discussing a bill amending the Act on Insurance Intermediaries. The Bill has been submitted to the Government by the Ministry of Finance. The following main important changes are proposed by the Bill: (i) to replace the current system of 5 categories of insurance intermediaries by a new system of only 2 categories of insurance intermediaries, (ii) the introduction of a new standardised index of annual costs of insurance products, the new index would have to be provided to customers in order to allow them to compare costs of different insurance products; (iii) the introduction of a new standardised form for customers, containing key information about offered insurance products; and (iv) new rules for regulation of commissions charged by insurance intermediaries in respect of some life insurance products. As a next step, the Bill will be submitted to Parliament for further stage of legislative procedure.