If you work in the Czech Republic, you've probably heard that you should set up a pension, but the moment someone mentions "DIP" and "DPS," eyes glaze over. These two Czech abbreviations represent fundamentally different products, and choosing the wrong one (or ignoring both) can cost you thousands of CZK per year in missed tax savings and employer contributions. This guide breaks down exactly how DIP and DPS work, how they differ, and which combination makes sense for expats.
What Is DPS? (Doplňkové penzijní spoření)
DPS, Supplementary Pension Savings, is the traditional Czech "third pillar" pension product. It's been around for years and is the most common pension product among Czech workers. Here's how it works:
You open a DPS account with one of the licensed Czech pension companies. Through OVB Allfinanz, a.s. we cooperate with multiple Czech pension providers, and the full list of OVB partner institutions is published at ovb.cz/o-nas/nasi-partneri.html. You choose an investment strategy, typically ranging from "conservative" to "balanced" to "dynamic", and make monthly contributions. The pension company manages the money on your behalf.
The key benefit of DPS is state matching contributions. If you contribute at least 1,700 CZK per month, the Czech state adds up to 340 CZK per month (4,080 CZK per year) directly to your account. That's an immediate top-up from the state on top of what you contribute, before any investment growth.
DPS Tax Benefits
On top of state matching, your DPS contributions are tax-deductible. You can deduct up to 48,000 CZK per year from your tax base (this limit is shared with DIP, more on that below). At the 15% tax rate, that's a saving of 7,200 CZK per year. At the 23% rate, it's 11,040 CZK.
DPS Limitations
The main drawback of DPS is limited investment choice. You're restricted to the participation funds offered by your pension company, typically 3 to 5 options. These funds tend to be conservatively managed. The other limitation is the 10-year minimum holding period, you can't withdraw without penalty until you've held the product for at least 120 months (10 years) and reached age 60.
What Is DIP? (Dlouhodobý investiční produkt)
DIP, the Long-Term Investment Product, was introduced in January 2024 and represents a significant shift in Czech pension policy. Unlike DPS, DIP is not a single product but a tax-advantaged investment framework.
You open a DIP account through a bank, securities dealer, or investment company (not a pension company). Once inside the DIP framework, you can invest in ETFs, individual stocks, bonds, and mutual funds, giving you far more control over your investment strategy than DPS allows.
DIP Tax Benefits
DIP offers the same tax deduction as DPS, up to 48,000 CZK per year deductible from your tax base. However, DIP does NOT receive state matching contributions. That 340 CZK per month is available only with DPS.
DIP Advantages
The biggest advantage is investment flexibility. You can build a globally diversified portfolio using low-cost ETFs (like those tracking the S&P 500 or MSCI World), invest in specific sectors, or choose bonds for stability. You can also invest in multiple currencies, EUR, USD, CZK, which is particularly valuable for expats who may retire outside Czechia. Fees on passive ETFs are typically 0.1%–0.3% per year, compared to 0.5%–1.5% on DPS participation funds.
DIP vs DPS: Side-by-Side Comparison
| Feature | DPS | DIP |
|---|---|---|
| Introduced | 2013 (current form) | January 2024 |
| Provider | Licensed pension companies | Banks, securities dealers, investment companies |
| State matching | Yes, up to 340 CZK/month | No |
| Tax deduction | Up to 48,000 CZK/year* | Up to 48,000 CZK/year* |
| Investment options | 3–5 participation funds | ETFs, stocks, bonds, mutual funds |
| Currency options | Mostly CZK | CZK, EUR, USD, and more |
| Typical fund fees | 0.5%–1.5% per year | 0.1%–0.3% per year (passive ETFs) |
| Employer contributions | Yes, tax-advantaged | Yes, tax-advantaged |
| Minimum holding period | 120 months (10 years) | 120 months or age 60 |
| Minimum contribution | 100 CZK/month | Varies by provider (often 500 CZK) |
| Best for | Conservative savers, maximizing state matching | Active investors, multi-currency portfolios, lower fees |
*The 48,000 CZK tax deduction is a combined limit across DPS, DIP, and life insurance. You cannot deduct 48,000 from DPS AND 48,000 from DIP, it's 48,000 total.
How DIP and DPS Fit Together for Long-Horizon Expats
The Czech government introduced DIP in 2024 specifically because DPS, in its current form, was looking outdated for younger savers with longer time horizons. DPS rules require pension companies to invest fairly conservatively, which kept returns modest. DIP gives savers access to a wider range of investments inside the same tax-advantaged structure.
What that means in practice depends on your time horizon:
If your horizon to retirement is 20 years or longer: The case for DIP is strong. Over a long horizon, the higher-return investments DIP can hold (such as globally diversified equity ETFs) tend to compound away the absence of state matching. DPS is still useful as the place where employer contributions and the state matching land, but the bulk of your retirement saving may grow more efficiently inside DIP. Past performance is no guarantee of future results, but the structural difference matters.
If your horizon is 10 to 20 years: Both products can play a role. DPS captures state matching at 1,700 CZK per month. Anything beyond that contribution can sit in DIP or DPS depending on how comfortable you are with investment choice and volatility.
If your horizon is under 10 years to age 60: The 10-year minimum hold rule starts to bite. Both products require holding the contributions for at least 10 years to keep the tax benefits, so a shorter horizon may make a regular taxable investment account simpler.
None of this is a recommendation for any specific person. We work through your situation in detail before we set anything up.
An example contribution structure
For an expat at the 23 percent tax rate who can save 4,000 CZK per month for retirement, one common starting point looks like this:
Step 1: Open a DPS and contribute 1,700 CZK per month. This is the threshold that captures the maximum state matching of 340 CZK per month (4,080 CZK per year added by the state on top of what you contribute).
Step 2: Direct the remaining 2,300 CZK per month into a DIP account, invested in line with your time horizon and risk tolerance. If you stay at this contribution level for the full year, your combined contributions reach 48,000 CZK, the maximum that qualifies for the personal income-tax deduction.
Step 3: If your employer offers pension contributions as a benefit, direct them to your DPS account (this is the most common setup, though some employers can pay into DIP) and keep your own DIP contributions running separately.
The math at this contribution level: With 1,700 CZK per month to DPS and 2,300 CZK per month to DIP, you invest 48,000 CZK per year. You receive 4,080 CZK in state matching (on the DPS side only) plus 7,200 CZK in income-tax savings at the 15 percent rate, or 11,040 CZK at the 23 percent rate. Before any investment returns, that already adds up to between 11,280 and 15,120 CZK in tax-related benefits per year.
What If You're Only Here for a Few Years?
This is the most common concern for expats, and the answer depends on your timeline:
If you'll be in Czechia 3+ years: It's almost certainly worth setting up at least a DPS. Even if you leave and eventually close the account early, the state contributions and tax savings you accumulate during those years likely outweigh the tax deductions you'd need to return. Plus, employer contributions are yours to keep no matter what.
If you'll be here less than 2 years: The administrative effort may not be worth it unless your employer offers significant contributions. Consider investing on your own through a standard brokerage account instead.
Key point: You don't need to stay in Czechia for 10 years. You just need to keep the account open for 10 years. You can stop contributing after you leave and let the money grow. Many expats leave Czechia but keep their DPS/DIP running for the remaining years.
What you return if you close early: Only the tax deductions YOU personally claimed. You keep all of your own contributions, all investment growth, all state matching contributions (DPS), and all employer contributions. The "penalty" is essentially just giving back the tax discount, not your money.
How to Get Started
For DPS: Choose a pension company, select a participation fund, and sign the contract. We handle the comparison and paperwork for you, including checking which company has the best performance history and lowest fees.
For DIP: Choose a provider (bank or investment company), decide on your investment strategy, and set up regular contributions. We help you select the right ETFs or funds based on your risk profile, time horizon, and currency preferences.
Once set up, submit your pension contract to your employer's HR department to activate any employer contributions. We provide you with all the documents needed.
Want to see the exact numbers for your situation? Use our DIP vs DPS comparison calculator to model different contribution levels and see projected growth over time. Or use our pension calculator to estimate your total tax savings.
Frequently Asked Questions
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Let's TalkAbout the author: Nicolas Griss is the co-founder of Profi Expats, a team of CNB-registered financial advisors helping expats in Czech Republic since 2017. He specializes in pension planning, investments, and mortgages for the international community in Prague.