The Finance Ministry, in its prognosis, the Programme of Stability for 2015-2018, indicates an increase in costs for taking care of the ageing population, but the Labour Ministry remains silent about problems which the first, pay-as-you-go pillar will face within some decades.
“All the EU member countries will face significant demographic changes during the next 30-50 years,” reads the programme as cited by the Sme daily. “These will have a negative influence on systems of pension and health insurance. In Slovakia the demographic changes will be one of the biggest.”
The ministry forecasts that the birth rate will decrease and there will be two million pensioners in Slovakia in 2060, up from the current one million, while the number of people in productive age will decrease by almost one million. This will mean that only approximately one person or even less will work for one pensioner while the population would shrink from the current around 5.4 million to about 4.5 million. This will create great pressure on public finances as it will be necessary to find money to pay out pensions via the pay-as-you-go pillar.
“Expenditures on pensions will increase by 2.2 percent of GDP to 10.7 percent until 2060,” reads the report. “This is significantly above the average of the EU and Visegrad Four.”
Analysts have been pointing out problems of the first, pay-as-you-go, pillar criticising the state for not speaking about its risks especially now, when the second, private, pillar was opened until mid June. The government opened the second pillar arguing that this way it is enabling those, for whom saving in the second pillar is not advantageous, to leave it and return to the first pillar.
Vladimír Mariak, the director of the Institute of the Economic Policy Institute (EPI), also points out that the state should not calculate future pensions based on current conditions as future pensioners would retire under different conditions.
1. May 2015 at 6:30 | Compiled by Spectator staff