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The lower house of parliament approved the Budget – which included an increase in VAT needed to fund reduced contributions to the state pension, and which prime minister Petr Nečas's government linked to a no-confidence vote – and overruled September's veto by president Vaclav Klaus of the second pillar itself.
The pension reforms were introduced by the centre-right coalition in 2011, at a time when other Central and Eastern European countries were either clawing back second-pillar contributions – as in the case of the Baltic states, Poland and Slovakia – or effectively nationalising privately managed systems, as in Hungary's case.
Nečas's Civic Democrat-led coalition argued that the Czech pension system – a state-run system alongside a sizeable third pillar with 4.7 million members and some €10 billion of assets under management – was unsustainable in the long term. The Czech second pillar is to be funded with a 3 per cent contribution from the existing 28 per cent gross wage social security contribution, augmented by an additional 2 per cent.
Despite these inauspicious beginnings, most of the existing third-pillar fund management companies have applied to offer second-pillar funds, although they have scaled back their expectations of the numbers participating.
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