Slovenia hears IMF age warning but cannot act
SLOVENIA - The population of the southern European country of Slovenia is among the most-rapidly growing within the EU member states, noted the IMF in a paper on future pension threats to the country, but authorities argue systemic changes to pension provision are not possible.
"In less than 10 years, more than half of voters will be retirees," the IMF pointed out in a report on a mission in Slovenia.
"Under current policies, the demographic pressures are expected to increase age-related expenditures from 19% of GDP presently to almost 28% by 2050."
But the IMF delegation was told by authorities "systemic reform [of the pension system] is not politically feasible in the near term" as a study by the International Labour Organisation (ILO) has found this is mainly because of "strong opposition from trade unions, who perceive pension privatization as undermining the public social insurance system".
Another factor, according to the ILO, might be because of a "relatively low level of external debt, [Slovenia has] been less open to the influence of international financial organisations that favour privatisation strategies".
"If nothing is done now to improve the parameters of the [pension] system, calculations show that the system would be completely unsustainable by 2050," the head of the IMF delegation, Piritta Sorsa, told Slovene authorities.
But officials indicated "political support is lacking" for any pension reform beyond relaxing minimum required returns for private pension funds and the introduction of "active ageing" regulations, which include incentives to retire later.
However, in January - as reported by IPE - the IMF had found these incentives have not really worked.
"Although reforms were introduced to increase the full pensionable age and create incentives to defer retirement, the implicit tax built into the pension system would likely encourage workers, especially men, to leave employment early," said Philippe Egoume-Bossogo and Anita Tuladhar, the report's authors.
Around 20% of the Slovenian workforce currently has a pension arrangement under the voluntary third pillar. The second pillar currently only holds a few contracts for public sector employees, some of which have to pay into an occupational pension fund.
The majority of the population still relies on the state PAYG defined benefit provision which, according to the IMF, offers "generous" pension benefits.