What You Need to Know About Pensions and Why It’s Better Not to Know

If their fist is weak, a crutch will suffice – with these words, the president of the Croatian Pensioners’ Union, Jasna A. Petrović, announced protests by pensioners as the share of pensions in salaries has fallen to just 35 percent, thus joining a variety of groups that have decided to demand greater material rights from the government on the streets this year. According to purchasing power and many other parameters, Croatian pensions are consistently at the lower end of the scale in the European Union.

How to change these numbers and can pre-election handouts from the state treasury save the difficult position of Croatian pensioners? How to improve the poor pension statistics?

To answer that question, one must first analyze the indicators by which Croatia is worse off than other European countries. Namely, one of the culprits for low pensions lies precisely in these data.

– According to Eurostat’s estimates, Croatia has the fifth shortest expected working life in the EU, at 34 years, while the EU average is 36.5 years. On the other hand, the OECD’s estimate of expected pension usage for men in Croatia is 18.6 years, and for women, it is 25.7 years. The EU average for men is 19.4 years, and for women, it is 24 years. This implies that Croatia has one of the highest ratios of time spent in retirement compared to time spent in employment. Given the somewhat shorter life expectancy here, the time spent in retirement relative to life expectancy in Croatia is one of the longest in the EU, meaning that a relatively larger portion of their adult life is spent in retirement compared to most EU countries – explains Danijel Nestić, head of the Labor Market and Social Policy Department at the Economic Institute Zagreb.

In simple terms, Croatians work fewer years and spend more time in retirement than other Europeans. One of the culprits for this is the low penalization of early retirement. Croatia, at 62 years, has the third lowest retirement age in the EU. While some countries do not allow retirement before the legal age at all, such as Ireland, Sweden, or the Netherlands, in others, it is allowed only under the condition of significantly longer work experience than in Croatia.

As Nestić points out, only a few countries allow early retirement at 60 years like Croatia or even earlier for women. For example, in Belgium, you can retire early at 60, but only if you have 44 years of service. In Slovenia, 40 years of service is required. In Austria, you can retire early at 62, exceptionally at 60, if you have worked in heavy jobs for at least ten years in the last twenty years and have a total work experience of 45 years. The reduction in pensions for each month before the legal age is usually between 0.3 and 0.5 percent and is permanent.

Data provided by HZMO shows that most European countries do not have the option of early retirement or it is linked to years of service, so, with the exception of Greece, most countries require a minimum of 35 years of work to allow early retirement. Even then, the penalization is significantly higher.

– The relatively high share of early retirement users in the total number of pension users is a result of specific circumstances from Croatia’s past, those related to the Homeland War and the economic situation in the country at certain times, as well as relatively lenient conditions for obtaining the right to early retirement that were in place in previous periods, which resulted in a significant influx of early retirement users in certain years. However, we draw attention to the fact that the previous trend of early retirement has changed significantly and that the share of users who retire early has been steadily decreasing over the last ten years. Thus, the share of new users of early retirement in the total number of new users was 32.2 percent in 2013, and only 13.6 percent in 2022 – HZMO informed us.

What else do you need to know about pensions and why it’s better not to know can be read in this week’s feature in the new printed and digital edition of Lider.