At the beginning of this year, the government approved a new pension product. It is called the long-term investment product (DIP for short) and is an alternative to traditional pension savings. The aim of DIP is to make saving for retirement more attractive and to motivate more people to build up a sufficient financial reserve for retirement. Compared to traditional pension savings, DIP is much more flexible. Within DIP, people can invest more efficiently and more cheaply through stocks, ETFs, funds, or interest-bearing cash, and take advantage of tax benefits on top of that.
Why does DIP make sense from the employer's perspective? Besides the fact that employer contributions to retirement savings rank among the most popular employee benefits, contributions of up to CZK 50,000 per employee per year are exempt from the employer's social and health insurance levies. At the same time, it is a tax-deductible expense for the company. On top of that, a DIP contribution is just as easy to process as a contribution to DPS (supplementary pension savings). All you need to do is obtain payment instructions from the employee, and you can start contributing.
What's more, a DIP contribution also lets you reward employees who are not saving for retirement this way themselves. You can contribute any amount, both as a one-off and regularly. Compared to a salary increase, a DIP contribution works out better for both sides. A salary increase comes with higher social and health insurance contributions. Moreover, the net gain for the employee is further reduced by income tax and social and health insurance. By contrast, the employee receives a DIP contribution in full. Nor does it involve any additional levies on the employer's side.
Beyond that, it is an investment in the worker's future: they will be prepared for retirement, which reduces their stress and increases their satisfaction in their current job. Employees can also deduct their own DIP deposits from their tax base, up to CZK 48,000 per year.
In the Czech Republic, thousands of employers already contribute to their employees' retirement through DIP. One of the DIP providers is Portu, the largest online investment platform on the Czech market, with almost 250,000 users. Portu builds tailor-made investment portfolios for its clients, which is ideal especially for those who prefer not to have to worry about a thing.
Employers can contribute to their employees regularly or as a one-off, in various amounts. Employees can send in their own deposits either through their employer via a payroll deduction or individually from their bank account. Another advantage of DIP is that employees do not have to send in any deposits themselves and can use employer contributions alone for their retirement savings. You can find more information for employers about Portu DIP here.
