Aging population a growing challenge

A glossary of words as well as an exercise related to this article are also published online.

(Source: SME)

A glossary of words as well as an exercise related to this article are also published online.

SLOVAKIA is among the European Union countries with the fastest aging population, with Eurostat data indicating that by 2060 it will be the fourth oldest nation within the EU-28 group. Sociologists point to this as a growing problem.

The number of seniors drawing pensions stood at more than one million at the end of May, which represents an annual increase by 25,000 people, the SITA newswire reported in early June, citing the data of the state-run social insurer Sociálna Poisťovňa. In the following 15 years the rise in the number of elderly people will even accelerate, while the number of people at a productive working age will gradually decrease.

“The population between the ages of 20-64 years is starting to decrease, though it has been growing until recently,” Michal Mušák, analyst with Slovenská Sporiteľňa, told the Sme daily in late August. He specified that while the number of people at a productive age grew by 8 percent between 2000 and 2010, last year it dropped by 0.1 percent.

Slovakia’s unpreparedness for the growing number of elderly people is shown in the poor results it has achieved when it comes to active aging policies. According to the Active Ageing Index 2012 research project, which measured the national progress in ensuring activity and quality of life of aging populations in the EU and other United Nations Economic Commission for Europe (UNECE) countries, Slovakia placed 26th out of 27 evaluated EU member states, after poor performance in all four assessed categories. It placed 23rd in the area of employment; 23rd in participation in society; 23rd in independent, healthy and secure living; and 24th in enabling an environment for active aging.

Zora Bútorová, a sociologist with the Institute for Public Affairs (IVO), considers the situation of the aging population alarming and says it is necessary to start confronting it seriously. She mentioned this in early December 2013 when introducing the Fourth Dimension of the Third Age report. The publication contains information about the causes for Slovakia lagging behind other countries when it comes to active aging, ways to use the potential of older people in society, as well as numerous statistics and sociological surveys.

The report shows that the public believes older people face the most discrimination in the labour market, health care, services and state and local offices. According to respondents of the surveys, non-governmental organisations help to solve the problems of seniors the most, while the government and companies are not very effective when tackling this issue.

Moreover, older job seekers have limited opportunities for finding a job, with women being even less sucessful than men. The study showed that up to one-quarter of people aged 45-64 consider themselves poor, as reported by the TASR newswire.

Another finding reveals that working pensioners are more satisfied with their life than those who do not work. The book, according to its authors, aims to provide a better understanding of the importance of active aging for society.

“The concept of active aging is very important and does not relate only to old people,” Bútorová told TASR. “It is necessary to start with a change in attitude to one’s age much sooner.”

Aging vs. working population

The Labour Ministry warns that though the situation is not yet an emergency, problems may emerge in the upcoming years as the number of people born in the 1940s and 1950s will gradually leave the productive working age, significantly impacting the situation in the labour market. It will, for example, force the state to pay more on pensions, but there will be fewer people contributing to Sociálna Poisťovňa and the health insurers.

According to Vladimír Baláž, a prognosticator with the Slovak Academy of Sciences (SAV), there is no universal or easy solution to the problem.

“There will have to be a whole set of the partial solutions that will ensure that the system will not collapse,” Baláž said on public-service Slovak Radio (SRo) in mid-June.

One example of how to tackle the problems of an aging population is Japan, where the proportion of people over 65 years has already reached 25 percent, while it is estimated that in 2060, the percentage will rise to 40 percent. The ratio of people 65 years and older and people between 15 and 64 will be 1 to 1.3 by 2060. That means 1.3 working people will have to support 1 aged person, Japanese Ambassador to Slovakia Akio Egawa told The Slovak Spectator in a recent interview.

The Japanese government has passed various measures to solve the problem.

“We have, for instance, enacted a basic law to cope with an aging society,” Egawa said. “One of the important areas is medical care; thus, we have been trying to improve the medical health system, especially for elderly people.”

Japan has also passed measures to address the welfare system, such as shifting the retirement age towards 65. Egawa also mentioned having more women in the workforce. As compared to other countries, Japan has had a lower share of working women.

The Slovak Labour Ministry does not want to immediately shift the retirement age, which currently stands at 62. In 2012, parliament passed an amendment to the law on social insurance, based on which the retirement age will increase gradually starting in 2017, based on the actual state of people’s health condition, ministry spokesman Michal Stuška told The Slovak Spectator.

“Regarding the current physical condition of people in retirement age, work at for example 65 is unimaginable for many of them; therefore the parameter of the average life expectancy will be objectively evaluated in the future,” Stuška stressed.

Chances on the labour market

The Labour Ministry also plans to focus on increasing the employment of people aged 50 and more, for example through part-time work, or motivating employers to support this kind of work, Stuška said.

Though Slovakia declares it supports the principle of equal opportunities in the labour market for all age categories, the IVO report shows the old people feel discriminated against when it comes to jobs.

Baláž of SAV says that people aged 50 and more are not positively perceived in the private sector. According to the survey carried out when preparing the active aging strategy, the employers see three main problems when it comes to older people: their age, weak knowledge of languages and weak IT skills. The latter two, however, can be improved via various active measures on the labour market, Baláž said.

“So these people, if they were attending some kind of life-long education, would probably be more attractive for Slovak employers than they are now,” Baláž said, as quoted by SRo.

Changing pension system

THE YEARS 2004 and 2005 brought several changes to Slovakia’s pension system. Not only did the retirement age increase, but the three-pillar pension scheme was also introduced, allowing pensioners to save for their own pension.

Currently, the retirement age for both men and women is 62 years. Before the changes to the pension system came into force on January 1, 2014, men retired at the age of 60, while women retired between 53 and 57, depending on the number of children they raised. The increase in the retirement age is gradual, with women being expected to reach the 62-year level in 2023, the Institute for Public Affairs (IVO) wrote in its Fourth Dimension of the Third Age report.

Moreover, the amendment to the law on social insurance that became effective in September 2012 stipulates that the retirement age will gradually increase as of 2017, based on the increase of the average life expectancy.

Despite the higher retirement age, Slovakia is still among those countries in the European Union with the lowest retirement age, IVO report reads.

Another change brought about by the pension reform was the introduction of the three-pillar old-age pension scheme in 2005. Since then it has undergone numerous changes.

The first pillar is the pay-as-you-go pillar administered by the social security provider, Sociálna Poisťovňa.

The second is the capitalisation pillar. Those who are only in the first pillar allocate 18 percent of their gross wages to Sociálna Poisťovňa, although since the first pillar is unfunded their contributions mainly go to pay the pensions of existing claimants. Those who have opted for the second pillar allocate 14 percent of their social insurance contribution to Sociálna Poisťovňa and 4 percent to one of the pension-fund management companies, which invests their savings and sends them to an annual account showing how much their individual account is worth.

The third pillar is for voluntary supplementary contributions. These bring some tax advantages to its participants, who can save up to €34 on taxes per year.

This article is published as part of Spectator College, a programme created by The Slovak Spectator with the support of Petit Academy Foundation and Orange Foundation

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