Pension system reform discussed in debate

BELGRADE - The government has insufficient funds for pensions, but pension cuts alone will not be sufficient to ensure the sustainability of the pension system unless they are accompanied by financial consolidation in all sectors, the participants in a debate on pension system reform said on Wednesday.

Progressive pension cuts, rather than linear ones, are the likely solution because the inequality resulting from poverty must be reduced, they said.

There have been several pension system reforms in Serbia since 2003, but have only produced results on the expenditure side, while the issue of the revenue side is yet to be solved, said Ivan Mimic, financial director of the pension and disability insurance fund.

The pension and disability insurance fund provides 58 percent of the total funds required for pensions and 42 percent is covered by the government, while the ratio in other countries is 80-20, he said.

Serbia has 1.72 million pensioners, and the average retirement period is 17 years - 16.6 years among men and 19 years among women, Minic said.

In government projections, pensions account for 10 percent of the GDP, but the problem on the revenue side is getting bigger and bigger and the demographic situation is worsening as well, so it is impossible to create a self-sufficient pension fund, he said.

MAT Forum analyst Miladin Kovacevic said that reforms besed on extending the retirement age and imposing penalties for early retirement can only produce results over the longer term - in 15 to 20 years.

On the other hand, pension cuts are a short-term measure, so the sustainability of the system will depend on further reforms of the pension and disability insurance fund, he said.