|| The Czech pension system, which distributes more than a half of the total social security hand-outs in the Czech Republic and about 9% of its GDP, is going through a turbulent and extremely important phase of its development. While the underlying trends are as worrying as elsewhere in the developed or transition countries, the short term accounts look balanced and a thorough reform does not seem imminent. The system has so far managed to maintain its balance through tightening eligibility rules, postponing the retirement and keeping contribution rates quite high. In this article we argue that the long term regards are indeed more important and that the pension reform could foster further development of the Czech Republic in various aspects. This belief is based on the empirical evidence from the early reformers, mainly Chile. While its impact on the aggregate saving rate is still debated, the pension reform has undoubtedly positive impacts on the long term growth rates and on the capital markets. The role of a properly functioning capital market cannot be under-emphasized in all the reforming countries. The pension reform would foster much faster development of the capital markets and would bring many long-term financial instruments so far missing on these markets. The reform would also spur lagging privatization process.