Pension System Reform Policies: Comparative Analysis of Croatia, Slovenia and Serbia

Abstract

The main subject in this paper is the transformation of the pension systems in Croatia, Slovenia and Serbia, witch followed after Yugoslavia broke up. The process of establishing the new pension system was made on the foundations of the PAYG system, which was effective in the whole territory of former Yugoslavia. The outcomes of these reforms were different despite the influence of the World Bank advice (multi pillar system, transferring the financial base from government to individual, diversification of financial investment). In the paper, the emphasis is on the demographic and financial sustainability with many statistical data. It is concluded that Croatia is trying to resolve the pension system problems by introducing the mandatory funded pillar scheme, which must not be abandoned because of the transitional cost over the years, which would then have been futile. Slovenia introduced only the voluntary funded pillar, but because of bad demography in the future, the first pillar might become a large burden. Serbia also introduced only the voluntary funded pillar, but the reason for abandoning the idea of introducing the mandatory funded pillar was the inability to fund the transitional costs. Nevertheless, this option is not yet completely abandoned. The success of the pension reform will be shown in the future when the workers who participated in the new systems most of their working lives become retired.