ZAGREB, October 17, 2018 – The government on Wednesday sent a package of bills to parliament for the comprehensive pension reform following four months of negotiations with social partners, with Labour and Pension System Minister Marko Pavić saying that current pensioners can expect further increases in their pension allowances, while future pensioners can expect the second pension pillar to strengthen, the investments to increase in that pillar, and that pensioners will be able to select the most favourable option to use those funds upon retiring.
The pension reform package consists of six bills relating to pension insurance.
Pavić said that the comprehensive pension reform package had been in negotiation over the past four months with social partners, interested public, the finance industry and coalition partners. “I would like to assure current pensioners that the payment of pension allowances is not in question and that they can expect their pension allowances to continue to grow and that they need not worry about their pensions,” Pavić said at the cabinet meeting.
After pensions increasing by 6.39% during the first two years of this government’s term, a similar growth can be expected next year. He announced that 248,000 pensioners with the lowest pensions will receive an increase of 2.13% as of 1 July next year, as part of regular indexation.
He announced that options for pensioners to continue working without pensions being reduced would be extended to half the usual working hours. He underscored that the average working life in Croatia is 30 years while in Europe the average is 35 years and in Germany it is 37.8 years.
The next category is those pensioners who will retire as of 2019 or in the next 10 – 15 years but did not manage to save enough in the second pension pillar. Should the pension reform not have been conducted they would on average have pensions 600-700 kuna lower than current pensioners, according to the minister’s explanation.
“We have foreseen a supplement of 27% for them, or rather, three-quarters of 27% for those who are in the second pillar. We will additionally strengthen the second pension pillar that way and make it more attractive,” Pavić said.
“There is no talk of the second pension pillar being nationalised or that we are abolishing it. In fact, we want to strengthen it. Citizens can at any moment choose what is the most favourable for them. We are particularly sensitive about 300,000 pensioners receiving the minimum wage or 80% of the average wage and who, if they remain in the second pillar, will not receive even the minimum pension. It is particularly important to emphasise that right provided to them so that they can expect at least the minimum pension allowance,” the minister said.
For the third category of citizens, the youngest, further development of the second pillar has been ensured and its strengthening through the option of greater investments by pension funds in strategic government projects. They will have the opportunity to withdraw 15% of their capitalised savings immediately upon retiring.
As far as raising the retirement age to 67 and penalising early retirement, Pavić said that the law adopted in 2014 set the 67 retirement age to be introduced as of 2038, seeing that the pension system today has a deficit of 17 billion kuna and only 19% of pensioners with a working life of 40 years.
Even though the initial proposal set the 67 retirement age to be effective as of 2031, after negotiations with the unions a compromise has been reached and the 67 retirement age will come into force as of 2033.
“I once again have to assure citizens who enter the labour force at the age of 18, waiters, sales persons in stores, nurses and so on, they will be able to retire when they turn 60 if they have a working life of 41 years. People who continue their studies and enter the labour market aged 24, will be able to retire when they turn 65 while only those people who do not have a working life of 41 years will not be able to retire until they turn 67,” explained the minister.
