Pensions in Croatia to be frozen for three years.
In the next three years, more than a million and two hundred thousand Croatian pensioners should not expect an increase in their monthly income, according to a report in Novi List on August 6, 2015. Although the government has not frozen the pensions, pensioners will have little benefit. Pensions are adjusted with the growth of gross salaries, the average consumer price index and the cost of living. The last time the cost of living increased was three years ago. In 2012, the government abolished its earlier decision to freeze the pensions, but in the meantime, the inflation has slowed, there was even a period of deflation, while the wages started falling.
According to the government guidelines, pension costs over the next three years, from 2016 to 2018, will remain the same. Given that the number of retirees in this period is most likely to increase, it is obvious that the government estimates that there will be no reason for any substantial adjustment of pensions.
The consumer price index in the first half of this year was negative or close to zero, while the gross salaries, depending on the month, more or less stayed the same. The government will certainly abide by the laws and regulations that prescribe indexation of pensions, but the question is how much the indexation will be.
Importantly, in this period of fiscal consolidation, the government has never even thought about reducing pensions, as was done, for example, in Spain and Portugal. Only pensions above 5,000 kuna acquired on preferential terms were reduced.
The government argues that the pension system is stable and there is no possibility that pensions would ever be decreased. But given the fact that the annual cost of pensions already exceeds 36 billion kuna, it will not be easy to keep that promise. If the next government decides to reduce any taxes, it will mean less money in the budget, which would thus weakening the sources of funding which cover the difference between the cost of pensions and the money that is received through the pension fund contributions. There are many who think that the best solution would be to suspend all payments to the second pension pillar (obligatory private pension accounts) in the next few years, which would redirect more than five billion kuna a year to the state budget.
