Addressing The Pension Crisis

by | Dec 18, 2023

Long-Term Investment Product (DIP)

The Czech Government are introducing a new savings product from 2024. The expectation is that the proposed Long Term Investment Product (DIP) will encourage more people to increase the amount they invest for retirement and the product is to be available from 1 January 2024. 

While it is not labelled as a pension, the DIP will be treated the same as supplementary pensions and life insurance products. These tax advantages should encourage people to invest in both public listed companies as well as  ETFs and bonds. 

The Tax Benefits

Contributions of up to CZK 4,000 a month will reduce the personal tax base by CZK 48,000 a yearresulting in a CZK 7,200 a year saving in tax (at 15%). However, there will not be a State Contribution that is payable alongside pension contributions. It is often this State Contribution that is the driver to get savers to start pension contributions. 
Further, an employer will be able to make up to CZK 50,000 a year in contributions on behalf of employees, without having to pay social taxes and health insurance. This could be seen as a valuable employee benefit and, of course, the employer will be able to claim corporation tax relief on those contributions. 

Conditions of the contract

This is a long-term investment that is supposed to run for 10 years or more, without the possibility of withdrawing funds prior to the age of 60 or the investor will lose all the tax benefitsretrospectively. Exceptions will be a transfer to another DIP provider and disability. 
As yet, it is not clear as to how the funds will be paid on maturity of the investment or whether there will be any compulsion to buy an annuity. 

How can I buy a DIP?

Regulated  securities dealers, investment companies or banks, will be able to offer DIPs and the Czech National Bank will register those that will be able to sell them.

Whether the DIP becomes a success remains to be seen. However, given the tax incentives for both individuals and companies, the DIP must surely be high up the list of considerations for those looking to provide an increase in retirement savings. 

We’re happy to discuss this topic in more detail. Contact Aisa International for more information. 

Image by shurkin_son on Freepik

The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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Post written by:

Chris Lean

In the UK he worked with accountants as an independent financial adviser, qualified as a Chartered Financial Planner and became an examiner for the Chartered Insurance Institute. He also qualified as a European Financial Planner and specializes in investment and pension advice to clients.

Aisa International is the only financial advice service company specialising in advice for expats that is regulated as a Securities Trader in the Czech Republic, USA, and UK.