Voluntary Pension Insurance in Slovenia

Slovenia is one of those countries where population ageing is an inevitable fact. The funds that we pool on the basis of intergenerational solidarity are managed by the state, which also determines the conditions for retirement and the coefficients according to which pensions are allocated and paid to individual pensioners. Pensions from the first pillar will gradually decrease, which will mean for many future pensioners that monthly receipts from the first pillar will no longer be sufficient for a decent life (this reduction will need to be compensated by receipts from the second or third pillar), whilst at the same time the working period is being extended and the minimum retirement age is being increased.

Problem

Slovenia is one of those countries where population ageing is an inevitable fact. The funds that we pool on the basis of intergenerational solidarity are managed by the state, which also determines the conditions for retirement and the coefficients according to which pensions are allocated and paid to individual pensioners. The reform of the pension system is represented, in addition to the second and third pillars, by two further significant facts.

Solution and Method

Pensions from the first pillar will gradually decrease, which will mean for many future pensioners that monthly receipts from the first pillar will no longer be sufficient for a decent life (this reduction will need to be compensated by receipts from the second or third pillar), whilst at the same time the working period is being extended and the minimum retirement age is being increased. Both of these mean a tightening of the conditions for pension insurance in the first pillar, but as compensation, particularly the second pillar offers a favourable and organised way of long-term saving for old age.

For individuals who will not recognise or understand that they themselves are responsible for their material position in old age, the standard of living in decades to come could be a serious problem. In any case, at the time when the author wrote this diploma thesis, it became completely clear to her that the wider social community needs to be made even more aware that they will be, or are, primarily responsible themselves for their material position in later life. The time when the state took care of our more or less carefree old age is therefore past.

Slovenia, as part of the old continent, is one of those countries where population ageing, due to a lower birth rate and an ever-increasing life expectancy of the population, is an inevitable fact. This demographic phenomenon increases the burden on public finances and thus on the active population for the pension system, which until the year 2000 was based exclusively on a single-pillar pay-as-you-go system. According to the intergenerational solidarity of the previous pay-as-you-go system, which has been retained under the new law (ZPIZ-1) in the form of the first pillar, those of us currently employed pay into the ZPIZ, from which pensions are paid to current pensioners.

The funds are managed by the state, which also determines the conditions for retirement and the coefficients according to which pensions are allocated and paid to individual pensioners. The fact is that the number of employed persons compared to the number of pensioners has been declining for a number of years. The problem of increasing the burden on the state pension fund has already been solved by countries around the world, and for decades they have had a pension system in which individuals take on part of the burden themselves, namely by saving for old age or one of the forms of supplementary pension insurance.

The reform of the pension system is represented, in addition to the second and third pillars, by two further significant facts. Pensions from the first pillar will gradually decrease in the coming years, which will mean for many future pensioners that monthly receipts from the first pillar will no longer be sufficient for a decent life – they will have to compensate for this reduction with receipts from the second or third pillar. At the same time, the working period for regular retirement under the new law is longer, and the minimum age for regular old-age retirement has also been raised.

Both facts mean a tightening of the conditions for pension insurance in the first pillar, but as compensation, particularly the second pillar offers a favourable, organised way of long-term saving for old age. The legislator encourages saving in the second pillar through tax reliefs primarily with the aim of reaching the largest possible number of insured persons and preventing the deepening of social inequalities. It is important that the individual becomes aware of his or her responsibility towards old age as soon as possible and recognises his or her obligation to save for it.

For individuals who will not recognise or understand this, the standard of living in decades to come could be a serious problem. The very fact that the consequences will not be visible in the short term, but are postponed to the future, threatens that they will also postpone the decision to solve the problem, that is, joining supplementary pension insurance, to the future. Unfortunately, a later start also means postponing the solution to the future, as there are no shortcuts in the supplementary pension insurance system…