Labour Minister Pavic presents pension reform bills in Parliament

Labour Minister Pavic presents pension reform bills in Parliament

Labour Minister Pavic presents pension reform bills in Parliament Izvor: Ilustracija, Pixabay

The pension reform aims at increasing pensions, securing the system's long-term sustainability, and fixing the imbalance between different generations of pensioners, Labour Minister Marko Pavic said on Tuesday in Parliament during a debate on the government's proposed three bills on pensions.

However, opposition lawmakers slammed the bills, saying that the reform was prepared without taking into account any analysis of demographics and population trends, and that a lot more should have been done in overhauling the pension system.

"By the end of 2020, about 3,000 women will retire, and their pensions will be 600-700 kuna (€80-95) lower than what current pensioners get, and we know that their pensions are not exactly high to begin with. This led us to try and solve the problem, which we did with the 27 percent addition (paid for by the government on top of regular pension allowance) and then we turned to fully improving the entire pension system," Pavic said.

In October, Pavic said that the state pension system produces a deficit of 17 billion kuna (€2.3 billion) per year, as salary contributions paid by the employed can't cover the government's spending on pensions.

He added that the proposed reform will secure a pension increase for 248,000 people who currently had the lowest pensions in the country, and that they can expect an increase of more than 6 percent next year. In addition, Pavic said, all pensioners would now be allowed to earn extra income by doing part-time work, in addition to their pensions.

Pavic said that the average pensioner in Croatia has had a short working life of only 30 years, and added that the government's goal is to increase pensions for existing pensioners.

The pension reform, expected to come into force in January 2019, foresees increasing retirement age to 67 as of 2033, penalising early retirement with 0.3 percent reduction in pension for each month of early retirement, or 18 percent for five years.

Pavic said that pensioners would now be allowed to work 4 hours per day while retaining the right to keep their pensions. Until now, Croatian pensioners would lose their pensions if they engaged in paid work.

Opposition MPs said the increase announced was not enough, as average pensions are less than half of average net salaries in Croatia.

"You should do more, because it's your obligation to save pensioners from poverty, and there are 90 percent of them impoverished. Adjust trends for the average pension to be in line with the average monthly salary, because now the pensions are a mere 39 percent (of the average wage) and we are almost the worst performing country in the EU in that regard," MP Ivan Lovrinovic of the opposition Promijenimo Hrvatsku ("Let's Change Croatia") party.

Pavic said that some groups of pensioners get much more than that already.

"We've already increased the average pension to 2,700 kuna (€364), which is 43 percent of the average pay. And we are pleased to say that people who have had a 40-year working life now receive, on average, a 4,600 kuna (€620) pension, which is 70 percent of the average pay," Pavic said.

(€1 = 7.41 kuna)

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