The government held an extraordinary session after talks with the Croatian Pensioners Party (HSU) and pensioners' associations.
Prime Minister Ivo Sanader and HSU leader Vladimir Jordan, who attended the session, said they were pleased with the bills.
The proposed pension bonus model refers not only to the 364,000 pensioners who went into retirement since early 1999 but also to those who will do so in the future, Sanader said, adding that Croatia would have a little less than 650,000 retirees in 2010.
Jordan said the government and the HSU had done a lot for pensioners in the last three and a half years, gathering an additional 14 billion kuna for pensions even without the latest bills.
The pension bonus bill deals with the differences among the so-called new pensioners by annulling them so that the difference in pensions of people retired in 1999 and those retired last year would be two per cent, said Deputy PM Damir Polancec.
The pension bonus act would go into force on October 1 and the bonus would be calculated for each year.
People retired in 1999 would get a four per cent increase, while those who will be retired in 2010 and later would get a 27% increase. Pensions would be increased regularly twice a year.
About 120 million kuna will be necessary to implement the law this year, to be set aside from the budget revision as well as other sources, said Polancec. The government has decided to move a budget revision amendment directing 60 million kuna from the Finance to the Economy Ministry.
The pension bonus act would also cover retirees receiving pensions through international social insurance agreements as well as those receiving the lowest pensions.
Amendments to the Pension Insurance Act, which would go into force on January 1, 2008, retain the institute of permanent decrease of early retirement pensions, but the decrease can be a maximum nine per cent as against the current 20.4% for five years.
The amendments also establish the lowest pension coefficient for all years of service at 0.825, which is the current coefficient for up to 30 years of service, after which it would be halved.
The amendments also refer to disability pension beneficiaries whose pensions will go up 48% on average, said Polancec.
He roughly estimated that a little over one billion kuna would have to be set aside for the implementation of both laws in 2008.
(EUR 1 = HRK 7.3)