Prime Minister Defends Governments’ Pension Reform Plans

By 1 July 2018

ZAGREB, July 1, 2018 - Prime Minister Andrej Plenković has reiterated that the pension reform is being launched to make the system sustainable and pensions adequate so that people could live off them, saying the claim which has appeared in public, that second pillar retirees will lose the entitlement to a 27% supplement, is wrong as this entitlement does not exist.

Asked by a Jutarnji List daily journalist's if he supported Labour and Pension System Minister Marko Pavić in his intention to rescind said supplement, Plenković said in Sunday's edition of the daily that "second pillar retirees aren't entitled to 27% so we are not rescinding any entitlement as it doesn't even exist."

He reiterated that these were just initial materials which were made public to start a discussion and raise public awareness of the upcoming pension reform, the first in 16 years.

He said the materials were drawn up by experts of the Labour Ministry, the Croatian Pension Insurance Institute and the Central Registry of Affiliates, and that these documents were yet be discussed by the Croatian Democratic Union party, its coalition partners and the government.

"If the reform isn't carried out, future pensioners will have 500 kuna lower pensions than the current ones, and we don't want that," he said, reiterating that 38 billion kuna went on pensions today, of which 21 billion kuna came from contributions and the missing 17 billion kuna from taxes.

The reform is intended to make a financially sustainable system, or at least cut the costs coming from tax revenues, and to gradually raise pensions, he said, adding that the ministry's materials indicated that the goal was to bolster the second pillar and not rescind it. He said Minister Pavić was proposing to increase outlays for the second pillar, from the current 5% to 5.5% in the first stage and to 6% later.

"The problem are people born after 1962 as, without the reform, they would have lower pensions than pensioners today. The minister is looking for a solution. We wish to have as many people as possible retire on a full old-age pension and as few early retirements as possible."

Plenković said the government was expected to discuss a set of bills on this matter on September 6.

Asked how he would resolve the problem with the coalition partners that criticised Pavić's plans, he said they had reacted to media reports and not the materials that had been prepared.

As for the tax breaks the government is preparing, he reiterated that VAT would be slashed by one percentage point and that income tax would be cut too.