ZAGREB, Oct 1 (Hina) - Croatia has launched an ambitious pension reform which will permanently change the existing system of generation solidarity into a financially sustainable system based on more insurance pillars. It will,
however, take 20 years to see contributions cover pension allowances. The statement was made by Sanja Madzarevic-Sujster of the Modern Economy - a civic initiative for promoting the system of modern economic thought - at a round table, "Pension Reform in Croatia", on Monday. She added the entire system would have deficits even after the year 2020. Last year's deficit in the pension fund accounted for 4.6% of the Gross Domestic Product (GDP) and it should drop to 3.1% of GDP by 2010. It is expected this year's pension expenses will reach 13.7% of the GDP, of which state transfers will amount to six percent, Madzarevic-Sujster said. Contributions today cover merely 58% of the expenses of the pension fund, while t
ZAGREB, Oct 1 (Hina) - Croatia has launched an ambitious pension
reform which will permanently change the existing system of
generation solidarity into a financially sustainable system based
on more insurance pillars. It will, however, take 20 years to see
contributions cover pension allowances.
The statement was made by Sanja Madzarevic-Sujster of the Modern
Economy - a civic initiative for promoting the system of modern
economic thought - at a round table, "Pension Reform in Croatia", on
Monday.
She added the entire system would have deficits even after the year
2020.
Last year's deficit in the pension fund accounted for 4.6% of the
Gross Domestic Product (GDP) and it should drop to 3.1% of GDP by
2010. It is expected this year's pension expenses will reach 13.7%
of the GDP, of which state transfers will amount to six percent,
Madzarevic-Sujster said.
Contributions today cover merely 58% of the expenses of the pension
fund, while the remaining 42% are covered with state transfers to
the Croatian Pension Insurance Fund. Since July 1 all payments have
been made through the State Treasury.
The pension reform will result in medium-term changes in dramatic
trends but will increase the fiscal burden as well. The
introduction of the second pillar pension funds in 2002 will result
in an additional annual decrease in the Treasury's revenues by 1.3%
of GDP.
In the long run, the new type of indexing, together with the new way
of setting the lowest pension per year of service, will almost
completely eradicate poverty among those covered by this system.
This way, by the year 2008 the number of pensioners living below the
subsistence level should sink from the current 21 to 2-3%.
Despite this, the imbalance caused by the existence of groups with
privileged pension rights will not disappear.
(hina) rml