The Constitutional Court found No. 135 / 2010 Coll.
The Constitutional Court's finding of 23 March 2010 on the application for annulment of Article 15 of Act No. 155 / 1995 Coll., on Pension Insurance
Valid
135
FIND
The Constitutional Court
On behalf of the Republic
The Constitutional Court decided on 23 March 2010 in plenary composed of Stanislav Balík, František Duchoň, Vlasta Formánková, Vojen Güttler, Pavel Holländer, Ivana Janů, Vladimir Krórek, Dagmar Lastovecká (Judge), Jiří Mucha, Jan Musil, Jiří Nykodém, Pavel Rychetský, Miloslav Dobrný, Eliška Wagner and Michaela Židlická, on the proposal of the Regional Court in Ostrava, on behalf of the Judge JUDr. Bohuslav Drahošová, on the abolition of Article 15 of Law 155 / 1995 Coll., on Pension Insurance, with the participation of the Parliament of the Czech Republic and Senate of the Parliament of the Czech Republic as participants in proceedings
as follows:
Paragraph 15 of Act No. 155 / 1995 Coll., on Pension Insurance, is deleted on 30 September 2011.
Reasons
Recital of the applicant's proposal and argument
1. On 13 April 2007, the Constitutional Court received a proposal calling for the annulment of part of the provisions of § 15 of the Second Act No. 155 / 1995 Coll., on pension insurance, as amended on 29 May 2006, expressed in terms of "up to 21 800 CZK 'and the amount of the personal assessment basis of over CZK 21 800'. as an alternative petit, the appellant proposed the annulment of the provisions of Section 15 of Act No. 155 / 1995 Coll., on Pension Insurance.
2. In the application to initiate the procedure, the appellant stated that in the legal case JUDr. K. S. was granted full disability pension in accordance with the provisions of § 39 (1) (a) of Law No. 155 / 1995 Coll. of CZK 13 346 per month (number 480 506 088) with the justification that the pension is made up of a basic area of CZK 1,470 per month and a percentage area of CZK 11 876 per month. This percentage area was calculated from the personal assessment basis for the years 1986 to 2005 of CZK 68 635.
3. The applicant challenged the amount of the pension granted at the Regional Court in Ostrava, knowing that its amount had been determined in accordance with the provisions of § 15 et seq. and § 41 of Act No. 155 / 1995 Coll., pointing out that the total amount of the pension granted was only 19% of its income (which he does not consider to be reasonable material security). Since the average pension in 2004 was 44% of the gross average income (or 57% of the net average income), the claimant considered that the pension granted to him constituted an absolute inequality between his person and the other beneficiaries of the pension scheme. In an action brought before the Regional Court, the applicant contested the inconsistency of the provisions of Article 15 of Law No 155 / 1995 Coll. with Article 30 (1) of the Charter of Fundamental Rights and Freedoms (hereinafter referred to as "the Charter '), since, in that provision, the reduction of income provided for in this provision for the calculation of the percentage rate of retirement is to put it at a disadvantage and create an unequal position.
4. In the regional court, the appellant considers the contested decision to be correct as regards the method of calculating and calculating the years worked. However, the appellant concluded that the provisions of Paragraph 15 of the Pension Insurance Act could not be maintained because it is unconstitutional as higher-income insured persons, namely those whose income exceeds the basic amount of the personal assessment base, are damaged by that provision. In addition, there is no maximum assessment basis limit for employees, unlike self-employed persons.
5. The appellant recalls that according to the name of the law it is an insurance, i.e. a legal institute which has a fixed content in each legal state. The insured person transfers his risks for consideration to another entity that assumes that risk and, in a situation, is bound to provide the specified performance. The insurance premium paid must therefore be treated as insurance, not tax. In the case of insurance premiums, according to the applicant, the relationship between insurance premiums paid and performance should be clear and proportionate. The appellant points out that the application of the second reduction limit in particular results in a substantial reduction in the calculation basis, without any clear consideration being given by the legislator to the legitimate objective and the meaning of such legislation. The actual result of applying these reductions is that the higher the amount of insurance paid, the lower the pension paid.
6. The contested provision of § 15 of Act No. 155 / 1995 Coll. is not, according to the appellant, a provision which eliminates inequalities, but rather a provision which clearly establishes flagrant inequalities between insured persons. In any event, the relationship of proportionality cannot be inferred. It is therefore the appellant's view that the reasons for such a procedure are objective and that the resources used are appropriate. In the appellant's view, it cannot be forgotten that the proportionality criterion of the chosen device (reduction rate) is not entirely absent in the legislation in question, with the reduction limits and percentage rates laid down bearing the characteristics of the legislator's pure libel. The reduction should be the same for all insured persons; the legal state cannot declare itself to be the holder of the insurance and at the same time to distribute the funds collected in such a way that it does not often guarantee 20% of the original monthly income from which the insurance was collected to those who contributed most to the scheme.
7. Furthermore, the appellant notes that the principle of solidarity is not a specific legal institution which implies certain rights and obligations. Solidarity means a sense of belonging to a whole, cohesion, community, willingness to help and support one another. It is undoubtedly an ethically entirely acceptable principle, but it is not sufficient in itself to justify and accept the above different treatment. Solidarity is sufficiently and significantly manifested by the fact that insurance payments are consistently dependent on the level of pay. The system ensures sufficient and general solidarity between generations and even goes so far as to require that those who can no longer expect any new benefits (working pensioners) contribute to the system.
8. At the end of the proposal, the appellant states that the provisions of Article 15 of Act No. 155 / 1995 Coll., on Pension Insurance, are in his view contradictory to Article 1 (1) of the Constitution and Article 1 of the Charter, since it manifestly discriminates unduly against a large proportion of insured persons.
Observations of the parties
9. The Constitutional Court, in accordance with the provisions of § 42 paragraphs 3 and 4 and § 69 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, sent the proposal in question to the Chamber of Deputies and the Senate of the Parliament of the Czech Republic and requested the written opinion of the Ministry of Labour and Social Affairs (within the meaning of § 48 paragraphs 1 and 2 of the Law on the Constitutional Court).
10. In its observations, the Chamber of Deputies of the Parliament of the Czech Republic first pointed out that no substantive objection was raised in relation to the wording of the provisions of Article 15 of Law 155 / 1995 Coll. in the legislative process in the lower House. Two amendments (Dalibor Štambera Štambera and Jaroslav Štambera) were tabled during the general debate on the House Press No 1574 on the wording of the provisions of Paragraph 15, both of which concerned only the above-mentioned reduction limits, not their percentage values. House Press No. 1574 was then approved with Mr Dalibor Štambera's amendment. Finally, the Chamber of Deputies notes that Law 155 / 1995 Coll. was adopted after a properly implemented legislative process, signed by the relevant constitutional authorities and declared in the Collection of Laws.
11. The Senate of the Parliament of the Czech Republic recalled in its observations that Act 155 / 1995 Coll. was adopted by the Chamber of Deputies before the creation of the Senate, however, it pointed out that the Act had already been amended many times (there were less than four dozen amendments), but no amendment concerned the contested provision of Paragraph 15. As regards the appellant's objection that "no maximum assessment basis for employees, unlike self-employed persons, has been set," the Senate pointed out that after the submission of the proposal by Act No 261 / 2007 Coll., on the stabilisation of public budgets, with effect from 1 January 2008 in the provisions of Section 15a of Act No 589 / 1992 Coll., on social security contributions and the contribution to state employment policy, the maximum assessment base (i) for employees was set.
Opinion of the Ministry of Labour and Social Affairs
12. In the introduction of its comprehensive opinion, the Ministry stressed that the calculation basis is a key institution in the Pension Insurance Act, without which the Act is essentially inapplicable. Two elements are essential for determining the calculation basis, namely the personal assessment basis and the so-called reduction limit. The reduction limits are set by the Government by virtue of the provisions of Section 107 (2) of the Pension Insurance Act, and the Act does not impose an increase in those limits ("the Government may increase ') and does not provide for any limiting conditions for their determination. According to the Ministry, the existence of the reduction limits and the level of their adjustment cannot be assessed without taking into account all the context and links to other elements of the pension calculation structure, i.e. in particular the method of indexing the assessment bases actually achieved during the relevant period from which the income for the calculation of the pension is collected.
13. At the same time, the Ministry recalled historical developments and pointed out that the reduction limits were not introduced in Czech pension insurance until the Pension Insurance Act, but existed almost 50 years before the Act was effective, starting with the effectiveness of Act No. 99 / 1948 Coll., on National Insurance. It should therefore be recalled that the 1995 legislation eliminates for the first time one of the previous restrictive measures, namely that, in essence, income above a certain threshold was not taken into account at all. In this context, it is noted that the legislation in force before 1 January 1996 contained a number of other restrictions on the amount of the pension, both by fixed amount and by the highest percentage rate not taken over by the Pension Insurance Act. The existence of reduction borders is therefore the only "limiting" element in the current construction of the pension calculation, according to the Ministry.
14. The Ministry also referred in its opinion to an international comparison, in which it referred to both the group of countries with a high (e.g. Italy, Finland, the Netherlands, Estonia and Croatia) and a low (e.g. Great Britain, Ireland, Denmark, Belgium or Switzerland) rate of equivalence of the pension granted and pre-retirement income.
15. The Ministry also paid attention to the issue of the nature of pension insurance, pointing out that the different character of social and private insurance is generally recognised. The main differences between "social insurance '(as can be identified by social systems) and" commercial insurance' (as can be designated by other types of insurance) are: (a) social insurance is mainly based on law, whereas commercial insurance is based on a contractual principle; (b) social insurance is strictly compulsory under the conditions laid down by law, whereas commercial insurance is primarily voluntary; (c) the performance in the field of social insurance is laid down in a parametric (not individually) law (often other than those which provide for rules on the payment of insurance premiums), whereas commercial insurance is determined in or at least results from a specific individual contract; (d) payments of social insurance premiums are not only made by the persons involved but also by their employers; (e) the performance by the State (through pension payers) is generally not dependent on the payment of insurance premiums, since the insured persons involved in pension insurance from dependent activities, although they are taxpayers of such insurance premiums, but not its "actual payers"; (f) a number of social and protective elements are applied in social insurance, which significantly modify the relationship between the income earned (insurance premiums paid) and the amount of the benefit and the conditions for entitlement to the benefit (pension); they are, in particular, institutions of alternative periods of insurance (where no insurance is paid), excluded periods in the calculation of the personal assessment basis, calculated periods for entitlement to invalidity pensions and guaranteed minimum pension rates. For these reasons, the Ministry concludes that it cannot be accepted that the premium paid must be treated as insurance, not tax. Payment of insurance premiums has a completely different meaning and effect from commercial insurance.
16. In another part of its opinion, the Ministry addressed the principle of solidarity. In relation to the so-called inter-generational solidarity, the Ministry notes that, although the age of retirement has increased in recent years, it has reached approximately the speed of extending the hope of survival, yet more old-age pensions are paid each year, affecting pension insurance expenditure. The amount paid on old-age pensions has thus increased faster than the number of old-age pensions in recent years. As regards solidarity within the (given) generation, the Ministry states that the solidarity of economically active people with economically inactive citizens is manifested mainly through alternative periods of insurance. These are periods taken into account for the purposes of pension insurance, even if they are not covered by premiums or any other payments. Moreover, the existence of alternative periods of insurance is linked to the so-called excluded periods; it is essentially replacement periods of insurance which fall within the relevant period from which the income for the calculation of the pension is collected.
17. The so-called income solidarity, according to the Ministry, represents an important component of solidarity within the generation, which leads to a higher rate of compensation for pre-retirement income for people with long-term low incomes, with the rate of compensation falling as income increases. The application of the principle of solidarity in pension insurance makes it possible to prevent the social exclusion of certain population groups and their threat to poverty. In this context, the Ministry stresses that, taking into account the general level of income of the Czech people and in relation to the objectives of preventing social exclusion, maintaining the standard of living for pensioners and promoting solidarity within and between generations, the situation of pensioners is appropriate. The Czech Republic is one of the countries with very low poverty rates.
18. Income solidarity is reflected in the entire construction of the pension calculation. The amount of income for the calculation of the pension is not determined for the entire period of economic activity, but only for a certain part which does not fall within the period at the beginning of which the income is generally lower. The expression of solidarity is that, in order to determine the percentage rate of pension, the actual measurement bases (gross income) that have also been paid are not taken into account, but the so-called annual assessment bases, which are essentially the actual measurement bases obtained, multiplied by the coefficient of increase of the general assessment basis, thereby ensuring that the level of income achieved in the specific calendar year of the relevant period is maintained in relation to the year of retirement.
19. According to the Ministry, the reduction limits are an important expression of solidarity in the context of the calculation of pensions, by which the calculation basis for determining the percentage rate of pension is determined from the personal basis. At the same time, the Ministry recalls that basic pension insurance is significantly involved in reducing the poverty of the older generation, which is also one of its basic objectives. The abolition of the reduction borders would make this situation much worse, because the reduction limits are an element that has a major impact on the level of solidarity in basic pension insurance. With reference to the Constitutional Court's finding in the case sp. zn.
20. In a further part of its opinion, the Ministry expressed its views on the question of the replacement ratio, pointing out that the reduction in the replacement ratio was not one of the so-called stabilisation measures. The question of a possible increase in this ratio should therefore also be assessed in view of the overall future development of the pension system balance sheet. The compensation ratio depends on a number of factors in each State. This is the balance sheet of income and expenditure of the pension scheme (including forecasts), the rate of pension insurance premiums, the overall tax and levy burden on residents and employers, the scope of support for supplementary pension schemes, the historical development of the pension scheme, the extent of the pension insured persons and the range of pension insurance payers, the importance of pension insurance income for the financial collateral of the population and the overall role of the pension scheme in society (including the solidarity rate). Taking these factors into account, it is noted that in the Czech Republic, the existing pension structure and the replacement ratio correspond to the social-economic and political reality, and that they are not an expression of "the legislature's pure desire," which only does not want to provide higher pensions to groups of insured persons with higher incomes.
21. According to the Ministry, the reduction of the calculation base by means of the reduction limits, i.e. the calculation of pensions not from the 100% average of the income recorded during the relevant period, but from the reduced average, is therefore due to the overall concept of the Czech pension system, which is based on a wider concept of solidarity in the system, and the interconnections and balances of the various elements of the scheme, in particular the extent of the calculation of the individual replacement periods, the method of determining the average of the income for the relevant period (including their indexation and reduction), the percentage rate (1,5%) of the calculation base for each year of the insurance period, the retirement age, the institution calculated. It should also be stressed that the scope of solidarity in the pension system is socially recognised and is also required by a large part of society and that a greater reduction in that solidarity would be perceived negatively by the large part of society.
22. At the end of its opinion, the Ministry refers to the abolition of the first and second reduction limits. The abolition of the two reduction limits for the reduction of the personal assessment base in the calculation of the pension under Section 15 of the Pension Insurance Act would, according to the Ministry, immediately manifest itself in the amount of newly awarded pensions by a step-by-step increase in their average relative level against wages from the current 45% to almost 80%. At the overall level of pensions, the abolition of the reduction limits would be gradually reflected, as it will only affect the newly granted pensions. However, in the long term, the average level of old-age pensions paid (measured by the average old-age pension relationship to the average wage) would increase to almost 65% of the average wage. This would be negative in the overall expenditure on pensions and the sustainability of the whole system.
23. The abolition of the second reduction limit for the reduction of the personal assessment base in the calculation of the pension under Section 15 of the Pension Insurance Act would, according to the Ministry, be reflected in the amount of newly awarded pensions, but this increase would only increase their average relative level of wages by about 5% from the current 45% to a little more than 47%. A relatively small increase in the level of newly awarded pensions is due to the fact that only less than 30% of the persons to whom the pension is granted have a personal assessment basis above the second reduction limit and the shift is only from 10 to 30%. In the event of a major change in or cancellation of the reduction borders, it would be necessary to analyse the level of all other elements of the pension calculation structure, the percentage rates for the period of insurance until the age of retirement and the reduction of the percentage rate of retirement for early retirement. Furthermore, it would be necessary to reassess the status or level of account of the so-called replacement periods that are assessed for the purposes of pension insurance, even if no insurance premiums or other payments are paid for them.
24. The abolition of the reduction limits for the reduction of the personal assessment base in the calculation of the pension would result in an increase in pensions calculated from the personal assessment base exceeding the reduction limit and, therefore, in the absence of changes in other parameters affecting the pension level, would result in an increase in pension expenditure. Changes in the reduction borders would create inequality between groups of insured persons, as they would only affect pensions granted for the effectiveness of these changes, and it is not economically realistic to eliminate these inequalities. The repeal of the provision of Section 15 of the Pension Insurance Act would result in the absence of a possibility of determining pensions, i.e. all direct pensions would be assessed only at the minimum guaranteed levels, since the definition of a key element for calculating the percentage rate of pensions (and the provision of Section 16 to 18 would thus become virtually inapplicable and thus obsolent) and the adoption of a new adjustment would be very difficult and some reduction would have to be readopted, as otherwise the replacement ratio (share of the pension to net wage) would be more than 90% (91 to 97%), which is financially unrealistic.
25. In addition, the Ministry recalls that the definition of the provisions of Section 15 of the Pension Insurance Act is not an obstacle to the increase in the reduction limits in order to assess the personal assessment basis to the greater extent for the calculation of the pension, since the government determines the amount of those limits, while no criteria are laid down in the Pension Insurance Act to determine the level of those limits. In practice, however, these criteria are given both the financial possibilities of the system (including balancing or matching the amount of pensions already granted, so as not to create differences between pensions awarded in different periods) and the role of the reduction borders in the concept of the Czech pension system, and therefore it was not, or could not be, made more significant changes in the amount of the reduction limits (in theory it would be possible for the government to set a second reduction limit of e.g. CZK 60,000).
26. At the end of its opinion, the Ministry notes that the proposal of the Regional Court in Ostrava to abolish the words "up to 21 800 CZK" and words "and 10% of the amount of the personal assessment basis above 21 800 CZK is calculated" in the provision of § 15 sentence of the Second Pension Insurance Act is not feasible, since these words do not appear in the current version of the Pension Insurance Act. In the provision of Section 15 of the Pension Insurance Act, there are still amounts of CZK 5,000 and CZK 10,000, which were not amended by any other law; Although these amounts were increased by government regulations, the government regulation does not constitute a direct amendment to the law. It is further argued that the amount of CZK 21 800 is not valid in 2009, since for 2009 the second reduction limit is the amount of CZK 27 000, based on the Government Decree No. 365 / 2008 Coll.; Even when accepting that the Government's regulation directly amends the law, there is an obstacle under Article 66 (1) of Act No. 182 / 1993 Coll., on the Constitutional Court, since the contested text, i.e. the amount of CZK 21 800, has already expired (see Government Decree No. 414 / 2005 Coll., Government Decree No. 462 / 2006 Coll., Government Decree No. 257 / 2007 Coll. and Government Decree No. 365 / 2008 Coll.).
Derogation of the contested provision
27. Paragraph 15 of Act No. 155 / 1995 Coll. reads: "The calculation basis is the personal assessment basis (§ 16), unless it exceeds CZK 5,000. If the personal measurement basis exceeds CZK 5,000, the calculation basis shall be determined in such a way that the amount of CZK 5,000 is calculated in full, from the amount of the personal measurement base above CZK 5,000 to CZK 10,000 is calculated 30% and from the amount of the personal measurement base above CZK 10,000 is calculated 10%."
Conditions of the applicant's active legitimacy, admissibility of the proposal
28. The application was lodged by the Regional Court in Ostrava in connection with the proceedings which are taking place in Ostrava, and one of those which must be applied in the proceedings to abolish the proposed provision of the Pension Insurance Act. It is therefore based on Article 64 (3) of the Constitutional Court Act.
29. The Constitutional Court also addressed the question of whether, in the draft provision, it may be the subject of proceedings within the meaning of the provisions of § 64 et seq. of the Law on the Constitutional Court, and in the context of a situation in which the Government's regulations have increased the so-called second reduction limit (as the Ministry of Labour and Social Affairs also pointed out in its opinion).
30. In the first alternative of its petition, the appellant proposes that part of the provision of Section 15 of the Second Law on Pension Insurance be abolished, expressed as "up to CZK 21.800" and "and 10% of the amount of personal assessment basis over CZK 21.800" is calculated. The Constitutional Court therefore proposes to derogate from the legal provisions in which the financial amounts were set out in Law 155 / 1995 Coll. which were subsequently increased in accordance with the provisions of Paragraph 107 (2) of the same Law by the Government Regulations.
31. However, the Constitutional Court did not have to deal with the consequences of the Government's action within the meaning of that provision, namely the question of whether, within the meaning of Article 67 (1) of the Law on the Constitutional Court, the conditions for the termination of proceedings are fulfilled, or whether the application within the meaning of Article 66 (1) of the Law on the Constitutional Court is admissible. The appellant made an alternative proposal to the Constitutional Court in the submission to the Constitutional Court, suggesting in the second variant the annulment of the provisions of § 15 of Act No. 155 / 1995 Coll., the Constitutional Court therefore did not find the conditions for the termination of the procedure and considers the proposal admissible.
Constitutional conformity of the legislative process
32. The Constitutional Court also examined, in accordance with Paragraph 68 (2) of the Law on the Constitutional Court, whether the law in respect of which the appellant contests the unconstitutionality of its provisions had been adopted and issued within the limits of the Constitution laid down by competence and in a constitutional manner.
33. From the observations of the Chamber of Deputies and the Senate of the Parliament of the Czech Republic, as well as from the relevant parliamentary press and data on the voting process, the Constitutional Court found that the Chamber of Deputies approved the draft pension insurance law at its 32nd meeting on 30 June 1995, before the creation of the Senate. 100 votes and 76 against. The law was signed by constitutional officials and on 4 August 1995 it was declared in the Collection of Laws, in the amount of 41 under the number 155 / 1995 Coll. The Pension Insurance Act was thus adopted in a constitutionally prescribed manner and within the limits of the Constitution, in compliance with the rules laid down in Article 39 (1) and (2) of the Constitution.
Own review
34. Thus, as was apparent from the narrative part of the reasoning, the Constitutional Court is faced with the task of assessing the constitutional conformity of the contested provision § 15 of Act No. 155 / 1995 Coll., on Pension Insurance. The subject of the review of the Constitutional Court is therefore primarily the question of whether the ratio between the level of income, pension insurance and the level of pension for existing legislation fulfils the constitutional requirement of "adequacy 'of physical old-age security (or incapacity to work or loss of a provider) and does not constitute an objection to the inequality of pension insurance participants. Therefore, the assessment of the veracity of the application for annulment of Paragraph 15 cannot only consist of an assessment of the constitutional conformity of the actual exercise of the right to adequate material security as enshrined in Article 30 (1) of the Charter, but also of the fulfilment of the principle of equality enshrined in Article 1 of the Charter.
Brief design of pension systems and Czech legislation
35. The contested provision of § 15 of Act No. 155 / 1995 Coll., on the basis of which the pension is calculated, cannot be considered in isolation - for example, only through the primacy of the legislation - but in the broader context of the construction of the pension system as one of the components of the state's social policy.
36. The pension system is an instrument of social policy of the state through which (basic) social policy functions are fulfilled. The laws governing social security issues, including pension systems, are generally a reflection of the state's social policy, which is always based on a summary of social and economic factors. In the pension scheme, the following functions are mainly fulfilled. Initial (historically oldest) is a protective function designed to provide protection for individuals or social groups. The pension system also has a division and redistribution function, with the redistribution function linked to the mitigation of differences and inequalities between individuals and social groups. One of the other functions of social policy is the homogenisation function, which aims to mitigate social disparities and unjustified differences, but the purpose is not in any way nivelisation. Social policy functions include a stimulating function to promote economic policy by stimulating individuals (cf. Gregorová, Zdenka: Pension systems, Brno: Masaryk University, 1998, p. 45-47).
37. Pension schemes should ensure the provision of physical security at certain social events. The provision of physical security can be implemented through three planes (so-called three pillars). The first (general) pillar consists of state-guaranteed pension schemes, the second pillar is based on employee (pension) schemes, and the third (as well as the second additional) pillar is based on the principle of personal savings (so-called pension supplementary insurance).
38. In view of the possible financing of pension schemes that are not directly financed by the State budget, there are two basic "insurance 'ways of financing - ongoing and funded. The basic difference is that, in the interim scheme, insurance premiums collected from economically active persons - insurance payers - are used to pay pensions to existing pensioners. In the case of a fund scheme, the premium paid shall be invested in individual accounts to finance future pension entitlements of persons who pay the premium.
39. In principle, the ongoing system requires full solidarity between the so-called 'intergenerational' for its functioning, which means, in principle, equal income and expenditure of the pension system in each year. In other words, if basic pension insurance is based on an ongoing scheme, this means that benefits already granted are paid from the premiums currently collected. Financial contributions shall not be cumulated in order to invest them. Thus, economically active generations immediately pay pension benefits to an economically inactive generation. The balance of financial balance in ongoing systems can only be achieved if the revenue is the same as expenditure.
40. On the contrary, the fund system is not characterised by such intergenerational solidarity, as it focuses on the individualised coverage of the social risk of an individual in the future by the imposition of its resources. The return on the fund system is determined by the gross return on assets achieved on financial markets, subject to the conditions defined by the regulator and the supervision and amount of administrative costs.
41. The fund system undoubtedly complies with the normal private-law concept of "insurance" much more than the continuous system, but this does not mean that the continuous system is not considered as an insurance system in principle in the social security theory. In principle, the insurance character results from the following characteristics: even in the continuous scheme, the sum of the premiums collected is assigned to cover the claims of the scheme and whatever the payment of the premium and its amount does not, in particular, have a direct effect on the amount of the benefit paid in the defined benefit systems, at least has an indirect effect, since participation in the insurance is an essential condition for entitlement to future benefits from the scheme, taking into account, in any way, the duration of the contribution to the scheme in the design of the benefit.
42. In continuous systems, the existence of a direct link between the amount of premiums paid and the amount of benefits received in the future is not necessarily a prerequisite. If, in the future, the benefit received is always somehow dependent on the insurance premiums paid in the past, it is the length of the insurance premiums, which in the batch formula is possibly a variable partly affecting its amount. However, the amount of the benefit is essentially dependent on the level of premiums paid by future generations. In principle, the merit of the awarded benefit cannot be determined directly from the amount of premiums paid in the past, irrespective of the younger generation's premiums paid at the time the benefit is granted, as there would be a risk of a system financing deficit. However, depending on the chosen design of the dose derivation, even in the continuous system, the rate of equivalence of the dose awarded and the previous income at the time of economic activity may be higher or lower.
43. Within both systems, there are two basic types of batch design in terms of depending on the amount of the benefit on the amount of the previous earnings (or premiums paid). These are so-called contribution and benefit-defined schemes. Benefit-defined systems are, by nature, owned rather by continuous systems, contribution-defined systems rather than fund systems, although various combinations appear in practice.
44. The contribution scheme shall specify the contribution rate payable by the insured person to the scheme. The amount of his pension depends directly on the amount of contributions paid and their appreciation and indirectly on the hope of his generation's survival at the time of retirement. The amount of the pension is therefore not "guaranteed" by the system or is not predictable. It is obvious that this method of batch design is particularly suitable for the fund systems, however there are also structures implanting the contributory defined system into the continuous system.
45. On the contrary, there is an exact formula in the dose-defined system by which the pension is calculated. Following the adoption of certain simplifications [the expected period of insurance, the amount of income (or the basis of assessment), etc.], the insured person should have an approximate picture of the amount of his pension for a number of years before the retirement. However, this creditworthiness of the amount of the liability to the individual is strongly contingent on the fact that key parameters of the pension system will not change over time.
46. The design of the dependency of the benefit on the previous payment of premiums is, among other things, an important factor in influencing the labour market and employment, which comes at the forefront in relation to the long-term unsustainability of pension systems in one of the net forms and in today's parametric settings. Pension systems should not encourage early exit from the labour market. In principle, longer residence on the labour market and longer insurance periods will ensure a higher pension under both pension schemes, helping to reduce the risk of post-productive poverty. However, the degree of influence on the behaviour of individuals in the labour market varies between systems. The contribution systems are actuallyneutral in their pure form. In other words, premiums paid for an additional year on the labour market will be fully reflected in a higher pension. The net defined contribution system thus does not motivate an individual to leave the labour market early, nor does it "punish" it for a later retirement. In practice, it is almost impossible to achieve this neutrality in a dose-defined system. Different generations, gender or income groups are favoured or penalised by this system in relation to the decision to remain on the labour market, so it is possible to motivate individuals to stay longer on the labour market.
47. On the other hand, however, the two systems differ in a degree of merit in the opposite proportion of benefits. The contribution-defined systems are also fully due in their pure form, i.e. that the pension is fully dependent on the income (or insurance) of the individual. They thus provide all insured persons with the same rate of compensation for their pre-retirement income, regardless of the absolute amount of such income. Conversely, batch-defined systems tend to conceal intragroup income solidarity. Thus, the rate of compensation for pre-retirement income is relatively higher for persons with lower incomes than for people with high earnings. A system with high income solidarity (typically a batch-defined system) is intended to be a tool for reducing poverty in post-productive generations, but excessive income solidarity creates barriers to the pension system. The insurance is seen as a tax rather, thus reducing the incentive to pay to the system, which ultimately supports the grey economy. The full merit system does not send out negative incentives to the labour market, but in its pure form there is a risk of a lack of pension for some pensioners. The income of these vulnerable categories must then be supported by other social systems.
48. In terms of both the method of financing and the design of the dose, each system has its advantages and disadvantages. A sufficiently defined system enables solidarity to be ensured, but if its weight is too high in the pension system, it may have negative effects on the motivation of individuals to remain on the labour market. Conversely, the defined contribution system does not affect the labour market, but may also lead to poverty in part of the population. Continuous funding is vulnerable to demographic developments and is politically abused for inter-generational injustice. On the contrary, funding is sensitive to financial market developments, the quality of regulation and the level of administrative costs.
Current system of Czech pension insurance
49. The current system of Czech pension insurance can be considered as a two-pillar system, with the first pillar being the basic system and the second (from the point of view of the general theory of the third pillar), the legal voluntary supplementary pension insurance with a state contribution. The first pillar of this system is general (affects the whole population), uniform (should not create unjustified differences), mandatory (provides for an obligation to contribute financially to the creation of resources) and socially solidarity. The structure of the pension scheme is based on the following principles, which must be respected by the legislation: merit, social need, security, guarantee and initiation, compensation and social integration, maintenance of acquired rights, indexation and removal of hardships (cf. Gregorová, Zdeněka: Pension systems, Brno: Masaryk University, 1998, p. 80-85).
50. The pension consists of two components, namely the basic amount fixed for all types of pensions irrespective of the period of insurance and the amount of earnings and the percentage amount reflecting the previous earnings of the insured person. The old-age pension (full disability and partial invalidity pension) is calculated at the appropriate percentage rate depending on the length of the pension insurance period obtained from the calculation basis. Two elements are essential for establishing the calculation basis, namely the personal measurement basis and the so-called reduction limit. The calculation basis is based on a personal assessment basis, i.e. the total of the assessment bases of the insured person in each calendar year of the relevant period, which, by means of a coefficient of increase in the general assessment basis, are adjusted to the wage level reached in the year preceding the year of the pension award. The sum of the assessment bases of the insured person for the calendar year multiplied by the relevant coefficient of increase of the general assessment basis shall be the annual assessment basis of the insured person and the monthly average of these annual assessment bases for the relevant period shall be the personal assessment basis. By reducing the personal assessment basis, the calculation basis for measuring the percentage rate of the pension shall be determined.
51. From the point of view of funding, the Czech pension scheme can be characterised as a net system of continuously financed, benefit-defined. It is therefore a system that requires a high degree of both intergenerational and intra-generational solidarity to function, and intra-generational solidarity, depending on demographic developments, and thus an increase in the number of pensioners versus economically active persons, as well as an indirect expression of intergenerational solidarity, as it constantly monitors the need for a balanced financial balance.
52. The pension allowance granted shall be calculated in such a way that, by multiplying the annual assessment bases by the coefficient of increase of the general assessment basis, the ad valorem annual assessment bases and their totals are first established. At the same time, the excluded times are added up. The calculation of the personal assessment basis shall then be carried out by multiplying the sum of the annual assessment bases over the relevant period by the coefficient provided for in Article 16 (1) of Law 155 / 1995 Coll. and dividing the resulting product by the number of days of the relevant period (from which the so-called excluded periods are deducted).
The calculation basis shall be a personal assessment basis not exceeding the set amount, which shall be counted in full, and shall be reduced for the first time by 30% if the second reduction limit is exceeded, with only 10% of the personal assessment base being counted.
53. On the basis of the system described, on the basis of its principles, the transfer of these principles to legal regulation and the way in which it is financed, the Constitutional Court assessed the fulfilment of the provisions of Article 30 (1) of the Charter, stating that "citizens have the right to adequate material security in their old age and incapacity to work and to lose their livelihood ', Act No 155 / 1995 Coll., or its contested provision, § 15. The Charter sets out basic parameters defining social guarantees of decent human existence. The aim of contemporary social security in the most general sense is to regulate the responsibility of the citizen for his future (compulsory insurance schemes) and to establish the degree and forms of social solidarity between citizens (mandatory or voluntary transfer of funds through tax system or sponsorship); cf. Klíma, Karel et al.: Comments to the Constitution and the Charter, 2nd edition, Pilsen: Aleš Čenek, Pilsen 2009, p. 1234.
54. The legal arrangements based on the general principles seek to ensure adequate material security for all participants in pension insurance, with a maximum accent on the principle of solidarity, both intergenerational and intra-generational (i.e. income). On the concept of solidarity, the Constitutional Court has already stated in the opinion of Pl. Solidarity can be seen from an individual's perspective as internal or external. Internal solidarity is due to the emotional proximity to others, is spontaneous, applies mainly in the family and other partner communities. As a rule, the State does not intervene in this relationship or only in a very limited way (see family relations governed by the Family Act). External solidarity lacks this emotional closeness, and the individual's consent to its application is therefore more reluctant. It is, for example, solidarity between the rich and the poor, capable of being less able, healthy and ill. The state is very active in this area. In spite of the principle of solidarity, redistribution is carried out, i.e. a movement that transfers resources from one to another - to those needed. Solidarity has its limits. It cannot take such a deviant form as to be felt by those affected by it as disproportionate, unparalleled, or even unfair, and to withdraw their silent consent. In the name of solidarity, the State may penalise only that part of the property capable of simultaneously destroying the activity of its performance and not beyond the constitutional limit of the protection of property. "
55. The Constitutional Court does not in any way call into question the principle of intergenerational solidarity in relation to the pension system, as it is built on as a system of continuous funding. However, the subject of the assessment must be income solidarity (intra-generational), reflected in the uniform percentage rate of premiums paid by the economically active population; Therefore, high-income sections of the population pay significantly higher financial amounts to the pension scheme each year than low-income groups. The principle of income solidarity is reflected in the fact that, when constructing the calculation of the pension under the applicable legislation, the pension scheme does not provide equivalent benefits to all insured persons, since, as mentioned above, it also fulfils, inter alia, the protective and redistribution function of social policy.
56. However, when implementing the protection and redistribution function of social policy, the legislator should not, when constructing the pension scheme or when constructing the calculation of pension benefits, suppress other essential functions of social policy, that is to say, neither the incentive function, which should in a desirable way affect the economic behaviour of insured persons and consequently lead to an increase in the overall income of the scheme.
Pension scheme as a public insurance scheme
57. The Czech Republic acceded to the construction of public social insurance as a basic system of insurance in the event of old age, disability or death of the provider only on 1 January 1996 by Act No. 155 / 1995 Coll., on Pension Insurance, (the basis of insurance was already laid by Act No. 589 / 1992 Coll., on Social Security Insurance and the contribution to the State Employment Policy, which worked for a transitional period as a tool for the gradual separation of the selected premiums from the state budget). This is a system of public insurance, whose functions and principles are different from commercial insurance (private law), which is repeatedly attracted to theoretical work (as referred to in its opinion also by the Ministry of Labour and Social Affairs). E.g. J. Výštek (Social and private insurance, Codex Bohemia, 1996, p. 65) states: "The obligation of insurance by law is a key element of social insurance which differs from the typical contract insurance. In the form of compulsory insurance, the barrier to insurer risks typical of private insurance can also be overcome - for example, the risk of unemployment is considered to be uninsurable or difficult to insure," market failure 'is a typical phenomenon for private insurance. Social insurance is mostly financed by contributions paid by employees and employers, with possible state subsidies.'
58. The different character of social insurance and contract insurance was already highlighted by pre-war technical literature. It refers in particular to the five-part Dictionary of Czechoslovak Public Law, namely the slogans "Private Insurance (contract)" in Volume III, Brno 1934, p. 147 et seq. and "Social Insurance" in Volume IV, Brno 1938, p. 343 et seq.; For example, the following slogans state: "The name of private insurance means all kinds of insurance based on the private contract of the parties concerned, as opposed to so-called social insurance.... However, contrary to private social insurance, there are some distinct characteristics.... The most important conceptual difference between private and social insurance is that private insurance is based on a free decision of the insured person and the holder of the insurance, whereas social insurance is based on a legal order: who falls within the range of persons covered by the law must be insured, whether he wants to or not, and the bearer of the insurance provided for by the law must take over the insurance, even if he first knows that the risk of insurance with this insurance is too great to be exported by individual insurance."
59. Even with respect to the differences between commercial and public insurance, which cannot be based on the principle of net equivalence (the level of performance fully reflects the level of premiums), the relationship between the amount of premiums paid and the amount of the pension granted must also reflect a certain degree of proportionality for individual participants in order to ensure that Article 30 (1) of the Charter is fulfilled in a constitutional manner.
60. The explanatory note to Act No. 155 / 1995 Coll. (Press 1574, Chamber of Deputies of the Parliament of the Czech Republic, 1st Election) states that "the rates and conditions of social security insurance are designed to cover the cost of pension and sickness insurance benefits derived from the income of economically active citizens under current legal status; these are old-age, widower, widower, orphan, disabled, partial disabled and for service of years, sick, support for the care of a family member, assistance in maternity, compensation in pregnancy and maternity.... The premium collected will be in accordance with the budget rules, which will cover all social security and employment expenditure through the budget chapter of the Ministry of Labour and Social Affairs of the Czech Republic."
61. The insurance premium and its amount (28% in total, 6,5% of which an employee and 21,5% employer) is therefore determined only on the basis of the economic calculation so that the pensions paid in that year are fully covered in the same year by the contributions collected by the insured.
62. In the chosen design, the principle of solidarity is reflected on the income side, because the insured person transfers the financial amounts directly to the system in proportion to the amount of his (taxed) income, thus implementing only the protective and redistribution functions of social policy. This conclusion does not change the fact that the so-called "stuffing 'of contributions to the pension scheme took place by Act No 261 / 2007 Coll. (the maximum coverage for insurance premiums in 2010 is two and seventy times the average wage).
Massive security - replacement ratio
63. The Charter of Fundamental Rights and Freedoms guarantees adequate physical security for all pension participants. Adequacy must be seen as an indefinite legal concept. The actual adequacy of physical security in relation to individual pension insurance participants must be seen in relation to the satisfaction of the individual's living needs, in relation to the widest possible range of persons, but also in relation to the insured person as a payer co-creating financial resources from which adequate material security will be provided. However, proportionality as a legal (constitutional) category is much more primarily aimed at examining whether any pension (or social) insurance scheme is capable of providing the disabled with the amount of resources in the event of a defined social event that will ensure that they continue to live while respecting the category of dignity in their social context.
64. The expression of the proportionality criterion is the internationally used benchmark of the so-called individual substitution ratio of the income-typical individual. A typical example of the use of this benchmark as a fundamental legal criterion for the adequacy of the system is, for example, the European Social Security Code (published under No 90 / 2001 Coll.). Article 25 requires each Contracting Party to ensure that protected persons receive old age benefits according to the criteria set out below. It then sets out the pension age criteria and the minimum coverage criteria. As regards the amount of the levy, Article 28 provides that the levy shall be a recurring payment. On the basis of Article 65 et seq., the typical recipient of the benefit is defined as a typical skilled worker, and the desired replacement ratio is defined. The typical recipient of the benefit in the old age (and therefore the reference object of the adequacy of the system) is a man, a skilled worker, in retirement age with a wife who is guaranteed a replacement ratio of 40%. A somewhat stricter but similarly designed criterion of proportionality is also the International Labour Organisation Convention No. 128 on Disability, Old-age and Survivor Benefits (published under No. 416 / 1991 Coll.), which requires a replacement ratio of 45% for an income-typical individual.
65. It is therefore clear that the basic legal requirement for pension schemes is to provide a certain replacement ratio not to all persons covered by the scheme, but to persons defined as an income-typical individual, with this structure targeting a person with more or less average income. None of the international legal instruments by which the Czech Republic is bound require that the same relative value of the replacement ratio (as a percentage) be achieved for each insured person.
66. According to the latest report of the Czech Republic on compliance with the European Social Security Code (see Sixth Report on compliance with the European Social Security Code, cf. http: / / www.mpsv.cz / files / clanky / 6219 / opra _ EZSZ _ 6.pdf), the replacement ratio for this income-typical individual was 46,2% in 2006, 45,1% in 2007 and 44,6% in 2008. Similarly, the general replacement ratio (ratio between average wage and average pension) decreased - 42,2% in 2003, 40,6% in 2007. This decline is due to a disproportion in wage growth, the pension formula used in the benefit-defined system and again in an effort to maintain a balanced financial balance of the system (decreasing number of economically active insured persons in relation to beneficiaries of pension benefits).
67. It follows from the above that the Czech pension system meets the basic requirement of proportionality, as defined by international contractual instruments. It can, however, meet it (given that it is a continuous dose-defined system) only at the price of high levels of intergenerational and intra-generational solidarity. In order, while maintaining a balanced balance of payments, to maintain the desired replacement ratio of individuals with earnings moving around about the average wage, it is necessary to resign to a similar rate of individual replacement for individuals whose incomes are in the order of multiple average wages. Examples may be those contained in the following table:
| Násobek průměrné mzdy | Starobní důchod přiznaný v roce | ||||
|---|---|---|---|---|---|
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| 0,7 | 55,6 | 53,6 | 55,4 | 55,7 | 55,2 |
| 1,0 | 44,3 | 42,9 | 44,2 | 44,4 | 44,0 |
| 1,5 | 32,1 | 31,2 | 32,2 | 32,3 | 32,0 |
| 2,0 | 25,6 | 24,9 | 25,6 | 25,7 | 25,5 |
| 2,5 | 21,7 | 21,1 | 21,7 | 21,8 | 21,6 |
| 3,0 | 19,1 | 18,6 | 19,1 | 19,1 | 19,0 |
68. From this overview, it is clear that the system is able to guarantee a satisfactory replacement ratio in the long term for individuals with income moving around the average wage, favouring those with below-average wages (which is seen as a justified advantage). It can do so only at the cost of reducing the individual substitute ratio for persons with double and multiple average wages - even the system guarantees them a benefit from a general point of view, which, according to the legislation, is a minimum for decent survival in old age, but a benefit which cannot guarantee the preservation of the standard of living of those persons from the economic period.
Mass security - reduction limits
69. The compensation ratio, that is, the relationship between the salary and the pension benefit, which is manifestly degressive in nature, is the result of the construction of pension benefits, the core part of which is the so-called reduction limits.
| Rok | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
|---|---|---|---|---|---|---|---|
| První redukční hranice | 7 400 | 7 500 | 8 400 | 9 100 | 9 600 | 10 000 | 10 500 |
| v % průměrné mzdy | 44,1 | 41,9 | 44,7 | 45,4 | 44,6 | 43,0 | cca 45 |
| Druhá redukční hranice | 17 900 | 19 200 | 20 500 | 21 800 | 23 300 | 24 800 | 27 000 |
| v % průměrné mzdy | 106,7 | 107,4 | 109,0 | 108,7 | 108,2 | 106,6 | cca 117,4 |
70. As a result of the reduction limits applicable to the calculation of the pension, the amount of the pension to that income decreases with increasing earnings. With the exception of 2005 and 2006, the first reduction threshold increased more slowly than the average wage, thus decreasing (relative to the average wage) the profit band, which is fully included for the pension level. The second reduction limit grew slightly faster between 2003 and 2008 (3.4 percentage points) than the first reduction limit. As a result, a more widespread (in absolute and relatively percentage terms) profit band, accounting for 30% of the pension amount, than the one in which earnings are counted in full for the pension amount and which affects the amount of all pensions. These trends were reflected in the reduction of the level of newly awarded pensions (their wage relationship) until 2004 and again after 2006 (see the quoted report of the Ministry of Labour and Social Affairs).
71. The Constitutional Court must therefore state that the legislation implemented by the contested provision of § 15 of Act No. 155 / 1995 Coll. (in particular by laying down the reduction limits) creates a situation where a participant in a pension scheme contributing three times as much as a participant contributing to an average wage is awarded a pension in - relatively - less than half as much. The statistics show that about 30% of insured persons exceed the second reduction limit when calculating the pension benefit (the first reduction limit is higher than about 95% of insured persons). It is therefore clear that the legal arrangements in order to ensure adequate material security for all members of pension insurance do not provide a proportion of insured persons with adequate material security, reflecting, to a specific extent, the principle of merit, thus fulfilling the stimulating function of social policy.
Replacement ratios - principle of merit
72. Despite the considerable diversity of pension systems in individual countries (in terms of the method of financing and principles for the construction of pensions with projecting), it is possible at least to illustrate the replacement ratios in the basic pension system of selected European countries provided by the Ministry of Labour and Social Affairs.
| Stát | násobek individuálního příjmu | |||||
|---|---|---|---|---|---|---|
| 0,5 | 0,75 | 1 | 1,5 | 2 | 2,5 | |
| FINSKO | 90,7 | 78,8 | 78,8 | 79,2 | 78,3 | 79,3 |
| ITÁLIE | 89,3 | 88 | 88,8 | 88,4 | 89,1 | 89 |
| CHORVATSKO | 66,7 | 63,1 | 61,6 | 59,7 | 59,6 | 58,9 |
| ESTONSKO | 59,9 | 60,6 | 60,9 | 61,3 | 61,5 | 61,7 |
| NIZOZEMÍ | 82,5 | 88,2 | 84,1 | 85,8 | 83,8 | 82,8 |
| BELGIE | 82,7 | 63,8 | 62,8 | 50,6 | 40,6 | 34,2 |
| IRSKO | 63 | 47 | 36,6 | 27,4 | 21,9 | 18,3 |
| NORSKO | 85,5 | 73,1 | 65,1 | 58,2 | 50,1 | 42,8 |
| DÁNSKO | 95,6 | 68 | 54,1 | 42,5 | 35,5 | 30,8 |
| ŠVÝCARSKO | 71,4 | 68,9 | 67,3 | 53 | 41,4 | 34,3 |
| BRITÁNIE | 78,4 | 57,7 | 47,6 | 38,2 | 29,8 | 24,5 |
73. In recent years, however different they are, in terms of the nature of the system and the degree of solidarity reflected, the common trend has also been the result of the European recommendation. A large proportion of countries reduce or aim to reduce the contributions to the state insurance system as the first pillar of the pension system and introduce or increase the contributions to the remaining pillars. In particular, in the case of the third pillar, this trend makes it possible to strengthen the principle of merit of the pension system (i.e. in favour of high-income groups). From a group of these countries it is possible to name Germany, for example, where, in the (similarly designed) interim system, part of the state insurance has been redirected to other pillars (state-owned funds) since 2002. The German example was followed by Slovakia, which is based on the same basic pension system as the Czech Republic. One of the main motives of the changes in the Slovak pension system was the attempt to strengthen the principle of merit (cf. citation from the explanatory note to the law: "The Prádny draft law on sociálnom poistení is the pránoma o primeranej miere miere solidarity and o primeranej miere merit, since tieto two princes musia even balanced and equally applied to all persons who are in the system prispievaú."). In addition, it should be stressed that in a number of European Union states, apart from general retirement provision, there is separate pension arrangements for certain professional groups, which reflect not only the risk criteria and the complexity of certain employment (workers working in burdensome conditions, members of the security and armed forces), but also the requirement of independence in the exercise of the profession (civil servants, judges). In this legislation, the constitutional principle of equality (unequal cannot be adjusted on an equal footing) is clearly reflected in the principle of merit of the pension system.
74. In assessing the adequacy of all the relevant components of the pension scheme (i.e. including the principle of merit), the Constitutional Court also takes into account the views of the experts who have been involved in this issue in the long term, and can refer to the conclusions of the so-called "Nedědek Commission," which, in assessing the degree of merit of the pension scheme, has reached similar conclusions, which have been cited in the explanatory memorandum to the Slovak law: "The analyses have confirmed that the current system is financially unsustainable in the long term and generates annual deficits of 4 to 5% of GDP over a long period. This result is in line with the conclusions of the analyses previously carried out. Moreover, current calculations show that the current system is also microeconomically ineffective. It is characterised by strong income redistribution, which leads to high replacement ratios for low-income individuals and low substitution ratios for individuals with above-average incomes. The insurance elements of the system are suppressed at a relatively high premium rate. A high redistribution may result in: (i) a significant decline in the standard of living of persons with above-average incomes in the transition from occupational activity to retirement, (ii) this transition may be particularly painful for the middle class, whose incomes range only above the average wage threshold, and which, given the high premium rate limiting private savings, could not ensure an old age from its own resources.
One of the lessons learned from the analysis of the pension reform options is that there is insufficient room to strengthen the merits of the state pension system. A measure that increases relatively income-based pensions would lead to a dramatic increase in pension expenditure and thus to a deepening of already strong trends in deficits. The alternative is to finance a relative increase in the replacement rate of income by reducing the redistribution within the pension scheme. Therefore, take measures that will relatively reduce the amount of newly awarded pensions for sub-average income persons.
The political decision should be consistent with the economic principles and should take into account the initial state of the Czech pension system. Today's system is not financially sustainable in the long term. It shows a very high level of income solidarity. It also owns a very high volume of this solidarity as a result of a high contribution rate. The system is inter-generational unfair and its funding is not diversified. The pension system must be significantly parametric. The level of income solidarity is high in today's system. It can be left at this level, eliminating the risk of poverty in vulnerable populations. At the same time, however, it will affect the labour market and encourage citizens to pay high premiums to the egalitarian system. We therefore consider it appropriate to reduce the volume of income solidarity in the state pillar. "
75. The Social Insurance Insurance Report of the Ministry of Labour and Social Affairs (http: / / www.mpsv.cz / files / clanky / 5886 / right _ 2008 _ cz.pdf) states: "Parameter changes should be supplemented by a reform towards diversification of the system, both on the income side and on the expenditure side of the system, which should result in a strengthening of the assurance of adequate income in old age. The reform should therefore lead to a strengthening of the differentiation of pensions among middle and higher income groups. Any increase in the equivalence of pensions is due to the possibility of reducing the level of pensions of lower income groups. The area for the differentiation of pensions is determined by the difference between the minimum pension granted and the average pension. The possibility of differentiation of pensions also depends on the level of the premium ceiling, which in its own way determines the extent to which the differentiation in the basic pension scheme is to be addressed. With a relatively low premium ceiling, differentiation will be the task of complementary schemes and, on the contrary, with a high ceiling or absence of it, must be dealt with in the basic pension scheme.
Increasing the equivalence, while maintaining the level of the overall costs of the system and existing protection against the risk of poverty in old age, should be achieved for middle and higher income groups at the cost of strengthening the size of the pension for lower income groups. This can be achieved, for example, by combining an equivalent system with a minimum pension, where part of the premium is intended to cover the minimum pension and the remainder in an equivalent scheme. Another option may be a combination of a certain form of equal income with an equivalent scheme where entitlements in an equivalent scheme are obtained only from a certain level of income. To a specified level of income, premiums are paid only to an equal pension scheme and above that level part of premiums is directed to an equivalent scheme. Both of these options would allow the funding component to be involved. '
76. Experts, however, also treated the assessment of the degree of merit reflected in the pension system primarily through the primacy of economic impacts (i.e. especially in terms of the long-term sustainability of the system), which, however, ignores the constitutionally understood principle of equality. However, the conclusions of the experts clearly show indications of a breach of the principle of equality between individuals and groups as pension insurance participants (thus jeopardising the fulfilment of the basic functions of social policy as a whole and, as a result, the proper functioning of the pension scheme in which these functions are to be reflected). Part of the experts in their conclusions suggest that the only way to strengthen the principle of merit is not necessarily simply to require an increase in the financial resources of the system.
Constitutional conformity of the contested provision
77. The Constitutional Court, in its caselaw, formulated the aspects of the review of the constitutionality of the statutory social security scheme. In the finding sp. zn. Pl. ÚS 12 / 94 of 12.4.1995 (N 20 / 3 SbNU 123; 92 / 1995 Coll.) stated that "in all existing social security schemes the principles of solidarity and equivalence are represented in different proportions. Each social security system shall entail the advantage or disadvantage of certain social groups, depending on the preferred aspect of solidarity or the principle of equivalence. This regulation is reserved for a legislator who cannot proceed freely, but must take account of the public values observed when setting preferences. In the area under assessment, this is an area of economic legislation, the legislator has a much wider scope than in the laws that directly affect fundamental human rights and freedoms.... The Constitutional Court could not agree with the assertion contained in the proposal that the premiums paid to the old-age pensioner do not give them compensation in any group to which they contribute, and that they are therefore a hidden tax which is imposed on them in breach of the rules in force. '
78. The court also confirmed the outlines in other findings, in particular in the cases referred to in sp. zn. "In the finding of sp. zn. Pl. ÚS 12 / 94 - although it was a social security area - the Constitutional Court stated that the preferred aspect of solidarity or the principle of equivalence was reserved for a legislator who could not proceed in any way but had to take account of the public values pursued when setting the preferences." - and sp. zn. II. ÚS 348 / 04 of 9.6.2005 (N 120 / 37 SbNU 525) - "The Constitutional Court, in its finding sp. zn. Pl. ÚS 12 / 94, found that even in the field of social security, the application of insurance premiums was a legal insurance institution because it reflected the legal situation in which the citizen transfers his risk for consideration to another entity and that entity assumes that risk and is obliged to perform certain activities. It follows from the insurance relationship, even in public law, that, when the insured has fulfilled the conditions, the pension right created by the other party corresponds to the obligation to provide such pension benefits. '
79. Nor did he deviate from the line so drawn up in the Pl. ÚS 2 / 08 (see above), in which he stated on social rights: "Their concept is that they do not have an unconditional nature and can be sought only within the limits of the laws (Article 41 (1) of the Charter). This provision gives the legislator the power to lay down specific conditions for the implementation of social rights. Legal implementation must not be contrary to constitutional principles, in other words, the laws in question must not deny or annul constitutional social rights. When implementing the constitutional arrangements laid down in the Charter, the legislator must comply with Article 4 (4) of the Charter, according to which when applying the provisions on the limits of fundamental rights and freedoms, its substance and its meaning must be investigated. In the case of social rights, it can be concluded that their collective restriction is precisely that they are not directly enforceable under the Charter, unlike, for example, fundamental rights and freedoms. Their limitation lies precisely in the need for legal implementation, which is, however, also a condition of concrete implementation of individual rights."
80. Dismissing Judges Holländer, Malenovský, Cepl, Cermák, Güttler, Mucha and Procházka in a different opinion on the finding of sp. zn. Pl. Pl. Pl. ÚS 14 / 02 of 4.6.2003 (N 82 / 30 SbNU 263; 207 / 2003 Coll.) also registered in the thesis expressed in the case of sp. v. Pl. ÚS 12 / 94, in which the Court "established that it was the legislature's duty to express the proportion of the components of solidarity and equivalence in the social insurance system (including health insurance), further stated that this division must not be arbitrary. If otherwise, i.e. the absence of an element of equivalence, the Institute under examination loses its legal nature, ceases to be an insurance and becomes taxable. 'They then derived from the following:" Article 31 of the Charter in conjunction with Articles 41 and 4 (4) The Charter therefore imposes a fundamental right on insured persons to a transparent legislator designated by the component of equivalence in public health insurance, to an extent that still respects the nature of the legal insurance institution and does not change it into tax.'
81. From the case-law of the Constitutional Court as outlined above, the following can be generalized in relation to the constitutional provision of social rights: According to the first of these, the scope for reviewing the constitutionality of laws containing the regulation of social rights is narrower than that of fundamental rights under Title Two, Three and Five of the Charter, an area defined by the provisions of Articles 41 (1) and 4 (4) of the Charter. The second one is the prohibition (exclusion) of libido in their adaptation (Article 1 and Article 3 (1) of the Charter), and the third one is the necessity of statutory regulation of social rights (Article 41 (1) of the Charter). The connection of the first and second thesis is also a basic starting point for the examination of the constitutionality of Article 15 of Act No. 155 / 1995 Coll., i.e. it is a maximum, according to which the legal right of the legislator to a transparent component of the equivalence (proportionality) in public pension, sickness and health insurance, in accordance with Articles 41 and 4 of the Charter, as well as Article 1 and Article 3 (1) of the Charter for insured persons, comes from Article 30 (1) of the Charter in such a way as to preserve the nature of the legal insurance institution and does not change it into tax.
82. The relationship between the individual and the whole (society of which it is part) is reflected in a democratic society in the "tension" of the values of justice and freedom. Furthermore, especially in the context of the establishment of a 'social issue' in the 19th and 20th centuries, the issue of the relationship between social justice and acceptable levels of institutional activities limiting freedom is being raised. In this context, the acceptability of individual burdens (injury) is essential at the expense of public goods. In the present case, this question is reflected in the determination of the degree of acceptability of the inequality between entities with regard to the inequality in their income, pension insurance premiums and the level of pensions.
83. The constitutional principle of equality is the expression of the constitutional prohibition of libel in determining the rights and obligations of subjects. The summary of the previous case-law of the Constitutional Court on the rights arising therefrom is the finding of the sp. zn. The Constitutional Court referred to its extensive and steady case-law in which it formulated the aspects of the constitutional assessment of the category of equality [see, in particular, the finding of sp. zn. Pl. Pl. When understanding the constitutional principle of equality, he agreed in particular with the conclusion expressed by the Constitutional Court of the CSFR (the find sp. zn. The Constitutional Court of the CSFR saw equality as a relative category which requires the removal of unjustified differences. The principle of equality in rights must therefore be understood in such a way that legal discrimination in access to certain rights must not be an expression of pleasure, but does not imply that any right must be granted to anyone. The content of the principle of equality has thus moved the Constitutional Court into the area of constitutional acceptance of aspects of the distinction between entities and law. The first is to see the elimination of libel. The second point of view in assessing the unconstitutional nature of the law establishing inequality is that of a fundamental right and freedoms. In other words, in its case-law, the Constitutional Court interprets the constitutional principle of equality in terms of both accessorial and non-accessorial equality. Therefore, certain legal arrangements which favour one group or category of persons compared with others cannot be regarded without any further violation of the principle of equality. The legislature has some scope to consider whether such preferential treatment will anchor. It must ensure that the favourable approach is based on objective and reasonable grounds (legitimate objective of the legislator) and that there is a relationship of proportionality between that objective and the means of achieving it (legal advantage) (see, for example, the judgments of the European Court of Human Rights in Abdulaziz, Cabales and Balkandali, 1985, § 72; Lithgow, 1986, § 177; Inze, 1987, § 41).
84. In the event of a collision of a part of public periods with fundamental rights, the Constitutional Court applied a different structure of the principle of proportionality (which it also tested the conflict of fundamental rights arising from the principle of equality with other rights or public good) than that of the order for optimisation [finding sp. zn. Pl. ÚS 4 / 94 of 12.10.1994 (N 46 / 2 SbNU 57; 214 / 1994 Coll.), the finding sp. zn. Pl. ÚS 41 / 02 of 28.1.2004 (N 10 / 32 SbNU 61; 98 / 2004 Sb.)]. This alternative structure of the principle of proportionality could be called the exclusion of extreme disproportionality. In particular, there were cases of a review of the constitutionality of the statutory arrangements of the tax, the fee, or other similar statutory compulsory benefits (within this framework also provided for by the statutory compulsory insurance), as well as financial penalties [finding sp. zn.
85. The following conclusions can be drawn from the maximum set out in the above findings for the constitutional review of the link between the level of income, the level of pension insurance and the level of pensions: the constitutional principle of the division of power (Article 2 (1) of the Constitution), as well as the constitutional definition of the legislative power (Article 15 (1) of the Constitution), gives legislators wide scope to decide on the relationship between the amount of pension insurance premiums and the degree of solidarity manifested to the extent of inequality between income, insurance and pensions. In doing so, the legislator has political responsibility for the consequences of this decision. Although pension insurance is a public-law compulsory cash performance of the State and thus an intervention into the property substrate and therefore the property right of the compulsory entity, without fulfilling any other conditions, it does not constitute an issue in the constitutional order of the protected ownership position under Article 11 of the Charter and Article 1 of the Additional Protocol to the Convention on the Protection of Human Rights and Fundamental Freedoms [see also sp. zl. ÚS 12 / 94 of 12.4.1995 (N 20 / 3 SbNU 123; 92 / 1995 Coll.]].
86. The constitutional review of the relationship of proportionality between the level of income, pension insurance premiums and the level of pensions shall then include an assessment of compliance with the bail-outs arising from the constitutional principle of equality, both non-Accesorial (Article 1 of the Charter), i.e. the requirement to exclude arbitrarily in the distinction between entities and rights, as well as to the extent defined in Article 3 (1) of the Charter. The assessment of non-action equality depends on the review of the link between the legislator chosen by the legislative instrument and its intended purpose. The constitutional conformity of the legislation under assessment is sufficient in terms of non-actionic inequality if the classification evaluated is found to be rational in relation to the purpose of the law, i.e. if it can in any way influence the achievement of that purpose.
87. In the finding of sp. zn. Pl. ÚS 7 / 03 (see above) in order to fulfil the conditions of non-Accessional Inequality, the Constitutional Court concluded: "If the purpose of differentiating the rates of premiums is to ensure that they are fulfilled in accordance with the structure of the claims and if the information contained in the observations of the party to the proceedings shows the most unfavourable injurious behaviour in the mining and mining industry, the difference in the rates of premiums provided for in Annex 2 to Decree No 125 / 1993 Coll., as amended, cannot be described as correspondent with the party to the legislation indicated by the parties. For those circumstances, the appellant's objections concerning the unconstitutional inequality of the contested legal regulation cannot be attested. 'A contrario states that the unconstitutional nature of the legal regulation consisting of non-accesoric inequality is due to the absence of a relationship between the legislative instrument and its declared (intended) purpose.
88. According to the explanatory memorandum to the government draft Pension Insurance Act, the average old-age pension ratio to the average net wage is currently 56% (i.e. in 1995). Only after an increase in pension income from supplementary pension schemes in a perspective of 10 or more years can, in view of the possibility of greater differentiation of pension income from supplementary pension schemes, be gradually reduced by the differentiation of pensions according to the level of earnings and the number of years worked. "
89. An ilustrative calculation of the relationship between the average earnings and the achieved old-age pension can be obtained, according to which for a staff member with an income of about 50% of the average wage, the replacement ratio to gross income would be about 88% (about 9,000 CZK), for a staff member with a income of about 42% (about 10,000 CZK), for a staff member with a income of 200% of the average wage of about 29% (about 14,000 CZK) and for a staff member with an income of 300% of the average wage of about 15% (about 15500 CZK).
90. If the second of the purposes of the Pension Insurance Act were achieved, i.e. reducing the differentiation of pensions according to the level of earnings, the purpose of the first was not fulfilled, i.e. opening up the area of differentiation of pensions. According to the information provided by the Czech Statistical Office on supplementary pension insurance:... "there remains a still low awareness of the role that this form of provision in the future can play in the old age for a large part of the Czech population. In 2004 people saved less than 397 crowns on average per month, in 2001 it was 348 crowns. Although their income is rising, they do not send pension funds any more - only 2.2% of their average gross wage is deferred monthly to supplementary pension insurance, and this ratio is even decreasing year after year (in 1996 it was 3.2%)." (http: / / www.czso.cz / csu / csu.nsf / information / ckta130905.doc).
91. Legislative instruments enabling the achievement of the second of the above purposes of the statutory social security scheme, i.e. differentiation of pensions while ensuring social solidarity, are necessarily linked to the statutory regulation of social security premiums, namely the establishment of the maximum assessment bases for the payment of insurance premiums by Act No. 261 / 2007 Coll., which newly amended Article 15a of Act No. 589 / 1992 Coll., on social security contributions and the contribution to the state employment policy. This created a legislative space for proportional consistency between social solidarity and differentiation with regard to income and pension insurance, 12 years after the entry into force of the Pension Insurance Act.
92. Act No. 362 / 2009 Coll., amending certain laws in the context of the draft Act on the State Budget of the Czech Republic for 2010, this legislative means of eliminating the extreme disparity between the legal regulation and its purpose is being reduced, virtually in its consequences. Under the new provision laid down by it in § 15b of Act No. 589 / 1992 Coll. for the period from 1 January 2010 to 31 December 2010, the maximum assessment basis for the payment of premiums under § 15a (1) and (5) of that Act is an amount of two and seventy times the average wage. In this context, the explanatory note (press. 917) states: "The increase in the maximum assessment basis for the 2010 insurance premiums from 48 times to 72 times the average wage... will be reflected in the collection of social security premiums and the contribution to the state employment policy in the range of CZK 4 billion... The aim of this proposal is to increase the revenue of the state budget. '
93. From the purpose outlined in this way, the new legislation on the maximum assessment bases for the payment of pension insurance premiums results in two provisions. The first concerns the assessment of the relevance of non-accesorial inequality in the review of the constitutionality of Section 15 of the Pension Insurance Act. It can be concluded from the recap of the development of the legislation that, in the period until 1 January 2008 and after 1 January 2010, the latter lacked a link between the intended purpose (by excluding pensions under the Pension Insurance Act and their real differentiation in the supplementary pension scheme) and the legislative instrument chosen (by adjusting the premium rate and its maximum assessment base). But the second sequence also affects the assessment of accesoric inequality. If it is the subject of an assessment of the limit under which public compulsory cash performance by an individual of the State is no longer an insurance premium but a tax, this conclusion is based on a reasoned report to the government bill amending certain laws in the context of the draft Act on the State Budget of the Czech Republic for 2010, in which the government considers, with absolute honesty, the reduction of the maximum assessment base to be a source of "increased State Budget revenue," which is the purpose of the tax. In addition, that conclusion is justified by the flow of the curve expressing the relationship between the level of pension insurance premiums and the amount of the old-age pension in which the relationship between the two parameters is extremely disproportionately different. In the absence of extreme discrimination in reducing the moment, which is also in conformity with foreign legislation - see, for example, pension insurance arrangements in Germany - can be seen in the real maximum assessment basis for the payment of premiums, there can be no more than a breach of the principle of Accesoric inequality for the contested legislation.
94. In assessing the legislation, i.e. the law implementing the fundamental right to adequate material security, the Constitutional Court concluded that the design referred to in Paragraph 15, which embodies two reduction limits at existing levels for the existence of a pension scheme without effective "grounding ', constitutes a significant disproportion between the amount of the contribution to the insurance scheme, the amount of income and the amount of the pension benefit granted to a part of the insured persons, in breach of Articles 1 and 3 (1) of the Charter. In addition, the execution procedures under the provisions of § 107 (2) of Act 155 / 1995 Coll., on the basis of which the government (from an operational point of view) may increase the so-called reduction limits, but the legislator has transferred the power to modify the amount of the reduction limits without the necessary limits or criteria which it did not have in the previous legislation under current legislation. Nor could the Constitutional Court overlook the fact that the whole complex structure of the pension system is so untransparent that it is de facto completely incomprehensible to its addressees; For most insured persons, the calculated amount of the pension benefit becomes unverifiable [cf. Different opinion on the finding of Pl. ÚS 14 / 02 (see above)].
95. In examining the issue of the pension system, which included the contested legislation, the Constitutional Court based itself on its above-mentioned caselaw, which does not deviate from the approaches of foreign constitutional courts in the field of social rights, and thus directed it exclusively into the level of constitutional rights. The actual construction of the pension system leaves the Constitutional Court fully to the legislator, who is shown wide scope for implementing the social rights enshrined in the Charter, with the Constitutional Court defining only the negative, uninsurable limits, i.e. it cannot (positively) determine or anticipate any quantifiable variables. Similarly, he approached the social reform review, the Hartz IV Law, the Federal Constitutional Court (decision of 9 February 2010), which also stated that the legislature's discretion was in line with the restraint of control and review of the simple law by the Federal Constitutional Court.
96. The Constitutional Court states that it is not his task to assess the correctness (suitability) of the construction of pension insurance benefits, but it is his duty to assess whether the legislation chosen by the legislature succeeds in complying with the coutels enshrined in the Charter, in other words, whether the design is constitutionally conformal. The criterion of constitutional conformity is the "adequacy" of the chosen design, whereby, on the one hand, limiting the correctness principle of merit is an imperative (both accesorial and non-accesesorial) of equality and, on the other hand, the "adequacy" of minimum physical security, not only in terms of eliminating poverty, but also ensuring a decent standard of living for low-income insured persons.
97. It is not for the Constitutional Court to assess the chosen model of the pension system in terms of political or economic (in terms of de latila) or to model an optimal pension system (in terms of the de lehferenda considerations). Indeed, its choice and parameters have been the subject of both political and expert discussions for many years in the context of (more or less consensual) threats to the long-term financial sustainability of the existing system with regard to demographic developments. It is within these professional and political debates that it will be necessary to take into account all the social and economic aspects of the pension system legislation which, for the reasons set out above, could not be taken into account by the Constitutional Court. On the basis of its review, the Constitutional Court points out, however, that, in the existence of a whole range of pension schemes and methods of constructing pension benefits, a choice must be made for all social policy principles, as well as a pension scheme which consistently respects constitutional principles and complies with the provisions of Article 30 (1), Article 1 and Article 3 (1) of the Charter, while at the same time examining the substance of these fundamental rights within the meaning of Article 4 (4) of the Charter.
98. For the above reasons, the Constitutional Court granted the application of the Regional Court in Ostrava to abolish Article 15 of Law 155 / 1995 Coll. and annulled that provision.
99. In view of the complexity of the whole issue and the forthcoming reform of the pension system, the Constitutional Court postponed the enforceability of its decision until 30 September 2011, with the provision being repealed remaining applicable until the specified time.
President of the Constitutional Court:
JUDr. Rychetský v. r.
Different opinions under Section 14 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, were taken by the Judges Jan Musil and Jiří Nykodým to decide.
*) NB: Collection of finds and resolutions of the Constitutional Court, Volume 49, Found No. 73, p. 85, published under No. 166 / 2008 Coll.
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Regulation Information
| Citation | The Constitutional Court found No. 135 / 2010 Coll., on the application for annulment of § 15 of Act No. 155 / 1995 Coll., on Pension Insurance |
|---|---|
| Regulation Type | - |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 13.05.2010 |
|---|---|
| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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