Thursday, 9 June 2022

Family Pension Model, Worth €133m, Unveiled

ZAGREB, 9 June 2022 - A government-sponsored model of family pensions, which will take effect on 1 January, brings three crucial changes: an increase in the factor for family pensions, eligibility to use a family pension alongside one's own pension, and a 3% increase in the lowest pension allowances.

"We are sending a clear message that in the circumstances of overlapping energy and food crises and inflation pressure, the government's key priority is to provide social security to all citizens, notably senior citizens," Prime Minister Andrej Plenković said while presenting the new, combined model on Thursday.

Draft amendments to pension insurance legislation put an emphasis on family pension beneficiaries who will be entitled to a more equitable pension calculation and be able to use a part of the family pension while receiving their own pension in the event of their spouse's death, said the premier.

The changes will cover nearly 300,000 pension recipients, and in 2023, more than 1.1 billion kuna will be earmarked for that purpose.

An increase in the pension factor for over 136,000 pension recipients will mean a 10% increase in the family pension, or an average HRK 250 per user, and HRK 365 million will be set aside for that in 2023, Plenković said.

Making it possible for pensioners to receive a part of the family pension alongside their personal pension will lead to an average increase of HRK 500 per month for over 155,000 family pension beneficiaries, and this measure will cost HRK 750 million in 2023.

Croatia has thus joined those EU countries where it is possible for pension beneficiaries to receive both family and personal pensions, said the premier.

As of 1 January 2023, the lowest pension allowances will increase by 1.5%, and as of 1 January 2025, they will rise by an additional 1.5%.

Thus in 2023, this increase will cover 287,000 beneficiaries of the lowest pensions, and HRK 100 million has been secured for that purpose, the PM said.

Plenković recalled that since the start of the first term of his government in October 2016, the average pension allowance has risen by 20.15%, and currently the average pension amounts to HRK 3,047.

The lowest pension has increased by 26.41% to HRK 2,008, said Plenković.

The increase is not only due to pension indexation but also due to a set of measures undertaken as part of the pension reform, he said.

Labour Minister Marin Piletić said that for a person to be entitled to the family pension, they must be above 65 and meet other necessary criteria.

It is proposed that the personal and the family pension combined cannot exceed HRK 5,850.

Upon indexation after the adoption of the necessary legislation, this threshold may rise slightly, to exceed HRK 6,000, Piletić said.

The minister said that beneficiaries who may be users of the combined family and personal pension will have to request the relevant authorities to make calculations and inform them which of the pension models is the best for them.

The parliamentary deputy of the Croatian Pensioners' Party (HSU), Silvano Hrelja, said that this combined model was the result of a lot of analysis and calculation, to take into account the state of family pensions.

I am not euphoric but I am satisfied, he said.

(€1 = HRK 7.520038) 

For more, check out our politics section.

Wednesday, 4 May 2022

Finance Minister: Structural Reforms Precondition for Reducing Health, Pension Contributions

ZAGREB, 4 May 2022 - Finance Minister Zdravko Marić said on Wednesday that employers' proposal to further reduce the tax burden on labour are taken into account in principle but that additional discussions and analyses are required, while reducing contributions requires structural reforms in the health and pensions systems.

The Croatian Employers Association (HUP) said on Tuesday that attracting and keeping quality labour required a more significant reduction of overall labour costs so that employers could pay higher salaries to workers, proposing short-term proposals for an increase in net wages, which should happen relatively soon.

"It is necessary to significantly reduce the total cost of labour, including by increasing non-taxable income to HRK 5,000, reducing the lower income tax rate by 5 pp, from 20% to 15%, and keeping the higher income tax rate at 30% but raising the threshold for its application, from the current HRK 30,000 to 50,000", HUP said.

As for contributions, HUP called for reducing the contribution to the first pension pillar by 2 pp, from 15 to 13%, reducing the health insurance contribution by 1.5 pp, from 16.5 to 15%, and limiting the highest amount of payments for pensions and health insurance to four average monthly wages.

HUP also proposed a further increase in non-taxable payments to workers, notably considering that that does not mean additional costs for the state while creating more room for employers to compensate workers.

HUP advocates increasing the non-taxable amount for rewards from HRK 3,000 to HRK 6,000 and rewards for work performance from HRK 5,000 to HRK 12,000. It also advocates the introduction of non-taxable income for work from home, increasing the non-taxable amount for severance pay and retirement from HRK 8,000 to HRK 15,000 as well as increasing the allowance for the use of private vehicles for business purposes from HRK 2 to HRK 3 per kilometre.

Marić said that at present, at least two-thirds of taxpayers did not pay income tax since in previous rounds of tax reform tax breaks were introduced and basic tax relief was increased.

The principle of proportionality of taxation could be further discussed, he said, recalling other tax changes, including the exemption of young people from income tax, which this year will result in 146,000 young workers receiving HRK 640 million in tax return.

He said that he government had worked a lot on income tax, noting that the scope of nontaxable income had been expanded.

"Further reducing the tax burden, of which I am in favour, requires, among other things, paying special attention to health and pension insurance contributions," Marić said but noted that due to the situation in the health and pension sectors, creating preconditions for further reducing the tax burden on labour would require structural changes in the two sectors.

For more, make sure to check out our dedicated politics section.

Thursday, 16 September 2021

Minister Aladrović: 50,000 More Pension Contribution Payers Now Than Last Year

ZAGREB, 16 Sept 2021 - Labour Minister Josip Aladrović informed the parliament on Thursday that despite all the challenges, Croatia had registered roughly 50,000 more pension insurees at the end of August than a year before and also 9,000 more than at the end of August 2019.

Minister Aladrović underscored these figures while presenting the draft amendments to the minimum wage legislation, which were supported by lawmakers.

The draft amendments envisage the stipulation of the gross minimum wage and also fines for employers who pay wages lower than the defined minimum wage.

Commenting on trends in gross minimum monthly payments, the minister noted that at the end of 2013, the gross minimum pay was HRK 2,984 and it rose to HRK 3,120 at the end of 2016,  which meant that during the term of the Social Democratic Party (SDP) government it rose only by 4.5% or by 135 kuna.

During the term of this government, it increased from HRK 3,120 to 4,250 or by HRK 1,130, he said.

The net minimum pay rose from HRK 2,496 to HRK 3,400 or by 904 kuna that is by 36.2%, he stressed and added that this June the average net monthly wage was HRK 7,175.

Aladrović said that the growth in the minimum wage was evident, however, some shortcomings had been spotted and the draft amendments were aimed at correcting them.

Parliamentary deputies welcomed the proposed changes, and some of them warned that there were still some employers who paid only the gross minimum pay, while they gave the difference to a higher earned pay directly to workers or they denied the right of employees to free days.

(€1 = HRK 7.470695)

For more about politics in Croatia, follow TCN's dedicated page.

Friday, 20 August 2021

Indexation of Pensions to Result in Average Increase of €9 - Večernji List

ZAGREB, 20 Aug, 2021 - The indexation of pension allowances on 1 July will lead to their rise by 2.46%, which means that the average increase will be 68.93 kuna, with the lowest pensions going up by HRK 42.77 and the the highest by HRK 180.47, the Večernji List (VL) daily reported on Friday.

Pensions are indexed twice a year, on 1 January and 1 July, to account for increases in living costs and to be adjusted to changes in the gross average monthly pay. The latest calculation of these two variables paves the way for the 2.46% increase in pension allowances as of 1 July.

In July, there were 1,143,592 pension recipients in Croatia, and the average pension was HRK 2,581.99.

17.5% increase in pension allowances since October 2016

Since October 2016, the average pension has increased by 17.5%, the Zagreb-based daily reported.

The lowest pension, HRK 1,738.48, is currently paid to 270,495 beneficiaries.

A total of 1,752 recipients get pensions in the amount of HRK 7347.17. Their allowances have increased by HRK 1,376 kuna since October 2016.

 (€1 = HRK 7.5)

For more on lifestyle, follow TCN's dedicated page.

For more about Croatia, CLICK HERE.

Monday, 9 November 2020

Pensioners Will Be Able to Keep Theirs and Receive Family Pension, Says Daily

ZAGREB, November 9, 2020 - A new family pension model, to be introduced in 2022 at the earliest, will enable family members to receive a percentage of their deceased family member's pension and keep their own pension, according to unofficial information carried by the Jutarnji List daily.

According to the current family pension system, 70% of a deceased family member's pension can be inherited, but the new beneficiary, who is mostly the widow, must give up their pension if that is a better option for them, Jutarnji List said in its Monday issue.

Family members, namely widows and widowers, common law partners, life partners and informal life partners, are entitled to a family pension if the union lasted for at least three years and if they reached 50 years of age before the death of their partner, providing that the deceased insured person completed five years of insurance periods or ten years of qualifying periods.

The Croatian Democratic Union and the government made a commitment in their programmes to regulate family pensions in a different, fairer way, and a working group to be tasked with drawing up a bill should be established soon, while the bill should be ready by the end of 2021.

The percentage that a family pension beneficiary will receive is to be determined by the working group, but the request by pensioners' associations for it to be 50% of the inherited pension is not realistic, as it would be too much for the state budget to withstand.

The cheapest version would cost over HRK 1 billion a year, so the government says that the new model could only be introduced once the crisis caused by the coronavirus pandemic is over.

(€1 = HRK 7.5)

Friday, 6 November 2020

Croatian Pension System Faced With Number of Challenges, Hears Conference

ZAGREB, November 6, 2020 - An unfavourable worker to pensioner ratio, longer average life expectancy and low pensions are the main challenges for the Croatian pension system, it was said at an international online conference on the state and prospects of pension reforms.

The conference was organised by the Institute of Public Finance (IJF) and the Friedrich Ebert Foundation, with most opening speeches pointing to the fact that the pension reform carried out close to 20 years ago was a successful example.

At the time, along with the first pension pillar, a second and a third pension insurance pillar were introduced, which individualise pension saving and encourage voluntary saving to a greater extent.

Finance Minister Zdravko Maric said that pensions accounted for the largest portion of budget expenditures, with a share of around 10% in GDP.

Despite the challenges, Croatia has managed to maintain both the second and the third pillar, of which we are proud, and they will be strengthened in the future, said Maric.

The longer life expectancy, owing to development of technology, medicine and science, is good but has certain consequences for the pension system, he noted.

Speaking of the specificities of the Croatian pension system, he pointed to a rather unfavourable worker to pensioner ratio as well as an above-average share of people who have retired early, which, he said, are some of the reasons for further reforms of the pension system.

As many as 34% of elderly at risk of poverty, social exclusion

A senior economic advisor at the European Commission's Representation in Croatia, Judita Cuculic Zupa, recalled that payments into the second pension pillar had amounted to 5% since its establishment, suggesting that the government, as soon as fiscal circumstances allow it, should increase contributions to the second pillar, which are set aside from each insuree's gross wage.

She also noted that Croatia had too few people making payments into the pension system, which is due to a very low employment rate, the third lowest in the EU.

Cuculic Zupa said this was the biggest macroeconomic problem in the country whose resolution required the implementation of many reforms.

She warned that the share of elderly people at risk of poverty and social exclusion in Croatia was 34%, 15 percentage points higher than the EU average and largely due to low pensions.

She noted that one more specificity of the Croatian pension system was a significant share of privileged pensions and pensions granted under special regulations.

Pension funds' assets amount to more than HRK 120 bn

Croatian Financial Services Supervisory Agency (HANFA) director Ante Zigman said that with assets worth HRK 120 billion pension funds could continue providing assistance to the business sector, including in the context of potential privatisation and financial market development.

The head of the UMFO association of companies managing pension funds and pension insurance funds, Petar Vlaic, said that in the last two financial crises in Croatia pension funds had acted as real stabilisers on financial markets.

The importance of the four obligatory pension funds in Croatia is reflected, among other things, in the fact that individually they are the biggest holders of government bonds and they also hold stakes in many Croatian companies, said Vlaic.

He also said that assets held by Croatian pension funds would enable a future with adequate income for pensioners.