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Slovenian reform ‘has not helped labour participation rates’

SLOVENIA - The country's pension reform has been criticised in a report for the International Monetary Fund (IMF) for having created more incentives for early retirement .

Contrary to intentions, the 1999 pension reforms did not help to increase labour participation, which remains among the lowest in the EU, according to a recent IMF working paper.

"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," say Philippe Egoume-Bossogo and Anita Tuladhar, the report's authors.

They used calculation models proving that "accrual numbers indicate that the increase in benefits [for working longer] is outweighed by the loss of the additional year of benefit at age 61".

The report also notes that the approved retirement age still remains below EU-15 standards. For men, the 2005 full pensionable age was 60 years and 6 months; this is expected to rise to 63 years by 2009. For women it stood at 55 and is to be raised to 61 by 2024.

Another criticism is that "a large number of pensioners retire through alternative paths, such as the disability pensions, due to their generous benefits".

The authors recommend "parametric changes to the pension system" as well as raising the statutory retirement age in order to "prevent an exacerbation of age-related spending pressures as Slovenia goes through a large demographic shift in coming decades".

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