D3 - DistributionReturn

The burning issue within the pension system in the Czech Republic is the level of coverage of self-employed persons. According to the data, they constantly report their income near the level of minimal basis during their lifetime. We estimate the replacement rates, lifetime benefit and lifetime contribution index using updated unique dataset of Assessment Base for Pension Insurance to shed the light on this problem. We can sum up that the income distribution of self-employed persons is highly concentrated, with the peak at the profit level which corresponds with the minimal base for pension contribution. Due to the high degree of the Czech pension system progressivity, the general result is that the self-employed persons are better off in comparisons with the employees if we concentrate on relative measures, but worst off if we concentrate on nominal measures. The only way how to solve this puzzle may be the effective information campaign which will reveal the future level of pensions /replacement rates/ to encourage the self-employed persons to participate in other, broadly defined, pillars of pension system.