PRAGUE (Reuters) - The Czech government approved changes to the country's pension system on Tuesday, raising retirement ages and lowering pensions for future retirees as it aims to save the system billions of dollars per year.

The reform builds in gradual shifts in the retirement age, delaying retirement by seven months for people who are now 52, compared to the current retirement age of 65, according to plans. It also lowers pensions calculated for future retirees by about 8% compared with the current formula.

Czech pensions, funded from current contributions of workers and entrepreneurs, got a bump from automatic increases triggered by double-digit inflation in 2022 and 2023, raising their value versus average wages.

The central European country, like many others in the developed world, faces fiscal pressure form ageing populations due to higher life expectancy and low birth rates.

"(The changes) will prevent a collapse of the pension system and secure dignified pensions also for today's young generation," Prime Minister Petr Fiala said.

The centre-right cabinet's reform aims to keep the average expected age spent in retirement at around 21 years. This means that when life expectancy changes, the retirement age will change as well. Specific ages will be determined at the point when affected people will be 50.

The country's average life expectancy at birth is 76 years for men and 82 years for women, according to 2022 data by the Czech Statistical Office.

The country spent 9.4% of GDP on pensions last year, and the pension system showed a record 72.8 billion Czech crown ($3.10 billion) gap for the year, or around 1% of gross domestic product.

The reform also allows for earlier retirement for people working in physically demanding or risky professions, such as forestry workers, firemen, miners, welders or specialised nurses.

The government has enough votes to push the legislation through but the current opposition, led by the populist ANO party of ex-prime minister Andrej Babis, is likely to make the reform a campaigning tool ahead of parliamentary elections due in the autumn of 2025.

ANO dodged attempts at cross-party agreement on pension changes, moderated by President Petr Pavel.

This means the reform is likely to face stiff opposition in parliament where it is expected to go in the coming months.

($1 = 23.4740 Czech crowns)

(Reporting by Jan Lopatka; Editing by Michael Erman)