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news 09 Nov 17

Pension Reform Plan Encounters Opposition in Croatia

Penioners groups and some economists have slated Croatia’s announced reform of the pension system, saying penalising early retirement will not resolve the basic problem.

Sven Milekic
Illustration. Photo: Pixabay/Zstupar

As Croatia's government announces stricter rules for the state's ailing pension system, both pensioners groups and experts have warned that the announced changes will not resolve the key issue - the unhealthy ratio between working people and pensioners.

With only 1.16 workers for every pensioner in Croatia, the government plans to tighten the rules on people taking early retirement to stop the ratio from getting worse.

Last year, Croatia paid out pensions costing about 4.9 billion euros while working people paid only 2.7 billion euros towards contribution for retirement. The state budget covered the gap.

Now the government wishes to further penalise people taking retirement before the age of 65, possibly lowering their pensions by 30 per cent instead of the existing 20 per cent.

Also, noting the introduction of new technology and better security and protection at work, the government wishes to cut around 100 job categories in which employees have an opportunity to retire at a younger age. These include police officers, firefighters, workers handling hazardous chemicals and similar jobs.

Milan Tomicic, deputy president of the Croatian Pensioners Union, told BIRN that the union was dubious about the announced reforms, as previous ones did not resolve anything, “but just further worsened the issue”.

He said the union was firmly against stricter criteria for early retirement. “I don’t see how these stricter conditions will ease the unfavourable ratio between workers and pensioners … it [changing the ratio] should be done through new jobs,” Tomicic concluded.

Economic analyst Guste Santini agreed that the planned measures will not help Croatia turn round the unfavourable ratio, or find new money.

“The government must not ignore the fact that Croatia during and after the [independence] war was badly de-industrialised, so some categories of workers can only go to early retirement,” he told BIRN.

“Also, the government can’t deny that certain jobs can’t be performed at certain, older ages,” he added.

All Croatian workers pay into two mandatory "pillars" of the pension fund, giving 15 per cent of their gross salary for the first and 5 per cent for the second pillar.

The government has announced that in future, workers will have to give 10 per cent for the second pillar.

Santini rejects this idea as well, claiming it will have negative effects on the economy by raising the cost of work.

With Croatia’s retirement age set now at 65, the state has vowed to raise it to 67 by 2038. Although the government pondered doing this by 2030, following advice from the IMF it has backed off from this idea for the time being.

The government is also considering introducing a national pension for people who do not have the needed minimum years of working experience to get a pension.

This national pension would be set at around 40 per cent of the minimum salary, around 130 euros a month. The average pension in Croatia is worth around 300 euros.

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