SLOVENIA - Slovenia's government has seen its pension reform proposals rejected by an overwhelming majority of voters over the weekend, with more than 70% opposing any changes.
Proposals to raise the retirement age were planned to help tackle an increasing deficit in the country's pension system, but were rejected by 72.2% of the population.
The central electoral commission said that more than two-thirds of voters rejected the increase of the statutory retirement age to 65, while 27.8% supported it.
The reform, which was approved by the parliament in December last year, included raising of the retirement age, as well as lowering the replacement rate on pensions and changing the way pensioners can access their second-pillar retirement savings.
Bojan Grabec, managing director at the actuaries and pension fund consultancy firm BMA Partnerji, told IPE that a law introduced in 2000 stipulated that savings only needed to remain in the second pillar for a minimum of 10 years.
"For the first year, people are now allowed to claim their money back, which means that the funds in the second pillar continue to plunge."
The reform has been criticised by several trade unions in the country as well as by the opposition, with unions last year launching a successful court appeal opposing the proposals, resulting in the referendum.
The prime minister, Borut Pahor, himself admitted last week that Slovenians were unlikely to approve the changes and conceded that the reforms had not been introduced properly.
The International Monetary Fund (IMF) also criticised the reform of the pension system in Slovenia.
Earlier this month, the organisation published a report in which it said that the reform was not enough and that additional measures were needed to control expenditure.
The IMF report said: "The pension reform approved by the parliament is a step in the right direction but is insufficient in the long run.
"The private pillar should be expanded to compensate for the public benefit cuts while ensuring the portability of the benefits."
Slovenia currently needs to cut the edge its budget deficit to below 3% of GDP, which is expected to reach 5.8% of GDP this year. The EU estimates that the country's debt will raise to 42.8% of GDP in 2011 from 38% last year mainly due to the fact that society is ageing rapidly.
The government had previously indicated that it would examine other methods of tacking the deficit if the reforms were rejected, such as freezing pensions at their current level.