Labour Minister: “Future Pensions Not In Doubt”

By 6 November 2017

People are worried that the collapse in the prices of Agrokor’s shares could hurt pension funds.

Labour and Pension System Minister Marko Pavić said that, despite recent losses by obligatory pension funds at the Zagreb Stock Exchange, future pensions were not in doubt and added that pension funds, having felt the crisis in Agrokor was coming, sold most of the company's shares in time, with just a few shares of Agrokor’s companies Ledo and Belje remaining, reports Večernji List on November 6, 2017.

“What I would certainly like to tell our retirees and older citizens is that pensions are not in danger, the sustainability and the stability of the pension system is unquestionable, regarding both the first social security pillar and the second individual pillar. Everyone who claims otherwise is behaving in a very irresponsible way towards Croatian citizens,” Pavić pointed out.

He added that the second pension pillar, which includes individual accounts which workers have at obligatory pension funds, had a total value of 88 billion kuna, while the losses which had occurred were much less than their annual increase in the value of between four and five billion kuna.

“Three-quarters of the funds ​​are kept in government bonds, the rest are in various stocks, with highly conservative investment policy. Every year, they earn between four and five billion kuna, and the profit yield is about three to five percent,” Pavić said and added that the government was in constant contact with pension funds.

“We are in contact with the main pension fund representatives. They felt the oncoming crisis in Agrokor in time and sold most of the shares at the time, with just a bit of Ledo and Belje's stocks still remaining. Investments in shares and the second pension pillar are long-term, you win some, and you lose some, but the whole portfolio is very conservatively invested and diversified, and thus there is no possibility that future retirement pensions could be in danger,” Pavić said.

In recent days, the Zagreb Stock Exchange has seen a massive loss in the value of shares of companies which belong to the Agrokor group, whose prices declined between 56 to 89 percent on Friday, the first day of trading after six months of suspension.

The pension system in Croatia consists of three pillars. The first pillar is the public social security system, with workers paying 15 percent of their gross salaries. The second is obligatory individual account system, to which each employed person pays five percent of their gross salary. There are four obligatory pension funds to choose from. The third pillar is voluntary individual accounts system, with each person deciding whether and how much to pay.