Slovenia’s New Govt.: Plans to Raise Pensions & Secure System’s Long-Term Future (Feature)

By , 22 Aug 2018, 10:04 AM Politics
Slovenia’s New Govt.: Plans to Raise Pensions & Secure System’s Long-Term Future (Feature) Wikimedia - Cara Courage CC-by-ND-2.0

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STA, 21 August 2018 - The incoming government coalition is planning to upgrade the pension system and shore it up with a demographic fund in order to make it financially sustainable in the long run. Unofficial information obtained by the STA also indicates the partners plan to raise pensions and welfare benefits. 

One of the coalition's priorities will be trying to build a consensus as soon as possible on how to amend the pension system to ensure its long-term financial sustainability. They also want to transform the Pension Fund Management (KAD) into an independent Demographic Fund.

Janez Sušnik, the head of the Pensioners' Association, and Srna Mandič, the head of the Centre for Welfare Studies at the Ljubljana Faculty of Social Sciences, say that Slovenia absolutely needs such a fund.

"The fund's role is to give society a lever to manage long-term and predictable changes in structural ageing of its population; to invest into the fund in the fat-cow years, increase its value through long-term interest earnings, and to allocate it for future generations of pensioners," Mandič told the STA.

The fund is also important symbolically in that it shows caring and planning for the future, something that most young people today are unwilling to face up to.

Coalition plans also include a new strategy of economic migrations which would make it easier for companies to hire staff abroad in case of shortages in the domestic labour market.

Depending on the fiscal capacities, the coalition would like to reintroduce a tax break for pensioners with taxable incomes. They plan to increase the pension insurance contribution rate for employers by 0.8 percentage points a year and stimulate inclusion and higher payments into supplementary pension insurance.

Apart from regular adjustment for wage growth, pensions are to be adjusted to economic growth; when growth exceeded 3%, pensions would be adjusted by 1%, while the rates for growth over 4% and 5% would be 1.5% and 2%, respectively.

Sušnik is not happy with such a proposal: "We are now in a period of growth, while predictions are for a recession. If Slovenia should lose an external market, it will have very sluggish economic growth."

The coalition is also said to be planning to gradually increase the minimum pension for full pensionable service above the poverty line, now set at EUR 613. Also planned is a gradual increase in the pension rating base, which would also lead to higher pensions.

Meanwhile, the minimum wage is planned to be raised by 4.5% a year to EUR 700 by 2021.

The social aid is to be raised to EUR 385 and the welfare eligibility income cap to EUR 442 by 2020. The minimum jobseeker's allowance is to be increased as well and the coalition is also said to be committed to examining the options and fiscal effects of a potential introduction of a universal basic income.

Mandič welcomed the plans to raise pensions and welfare payments, but she aired doubts about the universal basic income. "A better solution is [Philippe Van] Parijs's idea of a basic European income as a means of getting people to identify better with the EU."

The coalition plans to create the conditions that would make it easier for young people to have children. They also want to contribute to "respecting diversity and accepting and respecting all family forms present in out society".

The incoming government's plans also include an idea to stiffen fines for the employer for laying off a pregnant woman or tricking her in any other way, as well as simplifying child adoption procedures.

Mandič finds that the goals are good, but the challenge will be the details and implementation. "Such measures produce results only in the long run, but they contribute to a better social atmosphere in which vulnerable groups and the future are cared for," she commented.

Further social policy plans include free kindergarten care and free textbooks for the first three years of primary schools, as well as setting up a sustainable system of long-term care. Mandatory contributions for the latter would be collected by the state-run Health Insurance Institute (ZZZS).

The head of the Pensioners' Association would have wanted the coalition to make more concrete commitments and assessments as to financial consequences of the planned measures.

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