The Association of Pension Fund Management Companies and Pension Insurance Companies (UMFO) engaged in a public discussion with journalists regarding the proposed pension reform by the Ministry of Labor and Pension System, which the Government of the Republic of Croatia is expected to discuss in September. The meeting with journalists took place on July 2 at the Forum Congress Center in Zagreb, where Dijana Bojčeta Markoja, the director of UMFO, emphasized that the association did not participate in the drafting of the pension reform proposal but wishes to take part in the public discussion.
The meeting was attended by Kristijan Buk, CEO of AZ Fund, Petar Vlaić, president of Erste Plavi, Damir Grbavac, CEO of Raiffeisen Pension Company, and Dubravko Štimac, president of PBZ/CO.
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All of them are concerned about the announcement by Minister Marko Pavić that members who transfer savings from the second pension pillar to the first will be able to receive a 27 percent supplement on their pension. Buk, who is also the president of UMFO, pointed out that pension funds have fulfilled their obligations to members, as they have earned 31 billion kuna since their inception in 2002 until the end of last year, ranking them among the top five compared to other countries, with earnings slightly below six percent.
The 27 percent supplement should be recognized for everyone
What particularly troubled the participants in the discussion was the 27 percent supplement received by retirees from the first pension pillar. The representatives of pension funds believe that combined pensions (first and second pillars) are lower than those from the first pillar due to the 27 percent supplement received by first pillar retirees. They argue that this supplement should be recognized for everyone since members of the second pillar also pay 75 percent of contributions into the first pillar.
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Buk also emphasized that due to demographic trends and the state of the pension system, individual responsibility for retirement should be developed.
100 kuna invested at the beginning of the reform is now worth 240 kuna
This fact is best illustrated by the reality that 100 kuna invested at the beginning of the reform is now worth 240 kuna. What was planned at the beginning of the reform but not realized was raising the contribution rate for the second pillar to 10%. Had this been the case, the calculations for pensions from the combined system would already look different. However, the true results will only be seen over a longer period, both in terms of the amount of pensions from the second pillar and in relieving the budget in the part that compensates for the insufficient amounts for pension payments from the first pillar.
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UMFO believes, based on information that is not entirely comprehensive, that the proposed solution for returning to the first pillar for those for whom it is more favorable is only a temporary solution that covers citizens who have already or will soon retire into a combined pension, and who have not worked their entire career in the combined system. We believe that the 27 percent supplement should also be considered for members of the combined system, which we continuously advocate. Therefore, we will provide our proposals and calculations at the working groups of the Ministry of Labor and the Pension System to which we have been invited – states UMFO.
Personal Property
The funds in personal accounts in the second pension pillar are the personal property of Croatian citizens; representing their pension savings that can ensure them higher pensions and a better quality of life in retirement in the future. Additionally, these funds are inheritable.
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We welcome the expressed willingness of the Ministry of Labor and the Pension System to continue the dialogue on the proposed legislative changes.
UMFO believes that a quality pension system that provides decent pensions through the second pillar will be one of the most effective demographic measures for the Republic of Croatia.
