The pension reform of 2002 created a robust, fairer, and more sustainable pension system, one of the conclusions presented at a press conference by Dubravko Štimac, the head of the mandatory pension fund PBZ Croatia osiguranje and president of the Association of Pension Fund Management Companies at the Croatian Chamber of Economy.
– Mandatory pension funds have met and exceeded the levels of returns from the beginning of the pension reform. Members of mandatory pension funds will, over time, have relatively higher pensions from the second pillar than from the first pillar. The costs of the system can be continuously reduced, which has been done so far, and the system can be continuously improved. The contribution of the funds to the national economy is already significant, but the essence is that this time is yet to come – these are some of the conclusions highlighted by Štimac at the conference organized primarily due to various analyses and media reports on the results and costs of pension funds. Presenting the results of work over the past nine years, he reminded that the pension reform was implemented because the first pillar was becoming increasingly unsustainable, and the construction of the second pillar aimed to ensure a long-term sustainable pension system.
Throughout this time, our funds have been investing in shares of INA, which they recognized as an interesting investment opportunity. As much as can be bought on the market, we buy. There is no agreement or joint action between the Government and pension funds, stated Dinko Novoselec, CEO of Allianz ZB pension fund management company.
– Regardless of the missed increase in contributions from five percent to the desired ten percent, two key reforms have been achieved. A new national savings has been created, amounting to more than 36 billion kuna, and a concept of personal accounts has been established, representing personal property – emphasized Štimac, adding that these two facts are often not sufficiently understood and highlighted. He also touched on the returns, stating that at the beginning of the reform, the idea of desired returns for pension funds was set at two percent above the inflation rate. After nine years of operation, mandatory pension funds hold an average annualized return of 5.27 percent, while the annualized inflation rate was 2.68 percent, resulting in a real return of 2.59 percent.
– With such returns, the funds have enabled their insured members to earn 5.12 billion kuna by December 2010 – said Štimac. Furthermore, he mentioned the costs that are also often misunderstood. In addition to fees, there are other costs such as REGOS costs (739 million kuna) and a World Bank loan (206.66 million kuna), which lead to the belief that the second pillar is expensive. According to the Association’s opinion, the largest part of REGOS costs relates to costs paid to Fina, so they could be significantly lower. As for the fees themselves, they are decreasing every year and are the lowest of all countries in the region (entry fee 0.8 percent, and management fee 0.75 percent). – I bet someone will now say that the fees are high again. Yes, but in relation to what? – commented Štimac. In addition to this issue, the situation of the first retired members who went into early retirement and now have a lower pension than if they were receiving it from the first pillar was highlighted. – The pension reform was not designed for individuals who will save for a short time, i.e., who will retire young, so conclusions should not be drawn based on incorrect samples – Štimac was explicit. However, he continued, even those individuals, if it were not for the Law on Pension Supplements, would have a combined pension from the first and second pillars only slightly lower than the pension they would have from the first pillar alone.
