News item: Prime Minister Robert Fico says he sees no option but to reduce contributions to the private pension savings system, given that the state budget lacks money to cover the transfers to private accounts.
By Xénia Makarová
The topic of contributions to the second pillar of the new pension system has been raised again. And once again, it is because of the budget. This time, PM Robert Fico himself conceded that these contributions might be changed; the government is expected to make such a change next year, to reduce the impact on the state budget, and to finance other government priorities.
Simply put, the government is considering reducing the sum of money that people put aside for their pensions in accounts with private pension firms. At the moment, half of the money that people are obliged to contribute to their pensions is steered towards these firms, while the other half is used by the state Sociálna Poisťovňa insurance house to pay out current pensions.
It is not acceptable for this topic to be reopened on average every six weeks. Some 1.5 million people have already entered the new system because they believed that in doing so they would better provide for their old age. The many debates on this theme have already left some of these people feeling uncertain.
But if the amounts were to be changed, for working people this would be an even worse development. The government wants to use money that it would otherwise have to put towards financing Sociálna Poisťovňa for other purposes.
There is a problem here. For one thing, the government has not yet said if increasing the money paid into the first pension pillar will automatically result in higher pensions paid out of this pay-as-you-go system. If they will not be higher, this means that the future pensions of 1.5 million people will be lower. On the other hand, if the government promises that in 30 years it will pay people more from the pay-as-you-go system, it will only be worsening Slovakia's pension system problems. In 30 years, there will be far fewer people working per retired person than there are now, and so these working people will have to pay more to support the same sized pensions. In other words, the government will be spending more now, and sending the bill to future generations.
The problem is that the current government will probably not then be in power. That is why it is trying to convince people that if it reduces contributions to the new pension system, future pension amounts will not change, while money will be freed up at the same time to use for other important priorities, such as compensating people who allowed themselves to be taken in by pyramid schemes. However, the people whose money the government will be taking today will still be around in 30 years.
6. Nov 2006 at 0:00