Labour Minister: Pension system losing €2.3 billion per year

Labour Minister: Pension system losing €2.3 billion per year

Labour Minister: Pension system losing €2.3 billion per year Izvor: Pixabay (ilustracija)

During a debate on amendments to the pension law in Parliament on Tuesday, Labour Minister Marko Pavic explained the objectives of the announced pension reform and that the deficit in the pension fund currently amounted to 17 billion kuna (€2.3 billion) a year, and that the reform aimed to ensure an increase in the current and future pensions.

"We have embarked on the reform because we are adapting to the dynamics of the labour market, economic circumstances, and demographic challenges," Pavic told MPs.

The average service life of a pensioner in Croatia is just 30 years. Only 20 percent of Croatian pensioners have more than 40 years of working life. Pensions are low and amount to 42 percent of the average wage, and the annual deficit of the pension system is 17 billion kuna (€2.3 billion), meaning that 17 billion kuna less is collected from contributions to existing salaries than is required to fund the system out of the state-managed first pillar, and the gap is bound to increase each year, Pavic said.

He said that the reform proposes a longer working life and an improvement of the existing system of generation solidarity, adding that "the second (private-run) pillar is not being nationalised."

"The most important thing this government wants is higher pensions for future pensioners," Pavic said, and added that that will cost 35-40 billion kuna (€4.7-5.4 billion) by 2040.

"What we are fighting for in this government is that 300,000 of our pensioners who received a minimum wage, and up to 85 percent of the average wage, do not receive less than the minimum pension allowance. That is a challenge that we have engaged in, which is something that not one government in the past 16 years wanted to do," Pavic added.

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