Slovenia government waters down second-pillar reform
SLOVENIA - Second-pillar funds in Slovenia will not have to shift from insurance funds to mutual funds under a new pension reform proposal, the government has said.
As part of a major overhaul of the first and second pillars, the Slovenian government had aimed to increase transparency in the system by forcing those pension companies that offer insurance-based pension plans to adopt a mutual fund structure.
This would have made it compulsory for the funds to re-sign contracts with each of the 500,000 members in the system.
Miroslav Ekart, executive director of the €185m PRVA pension fund company, the largest in the voluntary system, said the move would have been "quite dramatic".
"As the Slovenian second pillar is quite mature and no longer a major growth market, we do not have enough sales personnel to get all contracts re-signed within six months," he said.
He added that sales activities had also been reduced in the wake of the crisis, as companies are postponing their decisions on whether or not to join the second pillar.
However, the government has opted to make changes that are easier to implement.
Those will include a change in the pension calculation in insurance funds to make it more comparable with that of mutual funds, which use investment units to calculate pensions.
Mutual funds may have to switch to international accounting, which insurance funds are already doing.
To boost participation, the government also aims to force companies that join the second pillar to include all their employees instead of the currently mandatory 51%.
Ekart said: "This suggestion is OK with us, but we want the possibility for individuals to opt out if they absolutely do not want to join the system."
Pension funds also opposed a proposal to put in place hefty fines for late contribution payments by companies, as "the system is still voluntary and not mandatory", Ekart added.
The reform is scheduled for vote in the autumn.
A major point of discussion remains the first pillar and necessary changes to the retirement age, which the government wants to hike prior to 2015, as this will be the year from which baby boomers start to retire. (See earlier IPE story: IMF warns Slovenia pension reform is critical to fiscal stability)