ZAGREB, 15 Sept, 2021 - Abolishing the second pension pillar could, in the long run, result in higher public expenditure for pensions and a lower standard for pensioners, the Croatian Financial Services Supervisory Agency's board chairman, Ante Žigman, said on Wednesday.
Addressing a conference, organised by the Hanza Media company on pensions, Žigman said that the pension reform was the biggest economic reform in Croatia's recent history and that it had been lasting for 20 years and had shown huge resilience, while being supported by both left and right governments.
He underscored that at the end of August the net assets of the mandatory pension funds (OMF) amounted to HRK 128 billion, an increase of almost HRK 9 billion compared to 2020. One-third of that is from payments while two-thirds of that amount is from yields.
He recalled that a lot of European countries had launched pension reforms twenty years ago but only Croatia and Bulgaria have managed to maintain the established system whereas in other countries significant amendments to reforms have been made due to the negative consequences of the global financial crisis.
A European Commission analysis on the future of pension systems to 2070 indicated that the gap between pension costs and contribution paid in will widen in those countries that abolished the second pillar.
In Croatia, the share of public costs for pensions in GDP should increase until 2030 and after that, it should begin to decrease, he said.
"The results without a doubt indicate that keeping the second pillar and combined pension allowances from the first and second pillar certainly contribute to a better status for pension recipients and lower public expenditure for pensions," Žigman underscored.
Aladrović: Demographic challenge is a pressing issue
Labour and Pension System Minister Josip Aladrović said that the system needs to be upgraded so as to make it easier for management companies to make investments which would result in greater prosperity for (pension) fund members.
Aladrović illustrated the complexity of the pension system saying that 40 years ago there were four people employed to one pensioner whereas now that ratio is 1 to 1.3.
"This illustrates the challenges of the demographic trend Croatia is faced with," said Aladrović, underscoring that the demographic challenge is the most pressing one in the entire European Union.
He underscored that compulsory pension funds have savings of €17-18 billion and those savings represent an opportunity to improve Croatia's economic prosperity as well as an opportunity to meet the objectives of adequate pension allowances and the pension system's sustainability.
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