The ageing population and the associated challenges of the Slovenian pension system

• Published in: Financial theory and practice 2008-09, Vol.32 (3), p.321-338
• Main Author: Verbic, Miroslav
• Format: Article
• Language: English
• Subjects: Care of the aged; general equilibrium models; Generations; Insurance; PAYG; pension system; Pensions; Population ageing; Public expenditure; Slovenia; Social welfare; supplementary pension saving; sustainability of public finances; welfare analysis
• ISSN: 1846-887X; 1845-9757

The article presents an analysis of welfare effects in Slovenia, an analysis of supplementary pension insurance in Slovenia and an analysis of the effects of the pension fund deficit on the sustainability of Slovenian public finances. Stress was placed upon varying the parameters of the current Slovenian pension system and introducing mandatory supplementary pension insurance in Slovenia. It has been established that while young generations and new generations will lose from the pension reform, even complete implementation of the reform might not be sufficient to compensate for unfavourable demographic developments. The volume of supplementary pension saving is insufficient at present in Slovenia to compensate the deterioration of rights from the first pension pillar. Not only is the participation in the (voluntary) second pillar insufficient, but, especially, the premia are too low. The level of the expected deficit of the PAYG-financed state pension fund seems to be worrying, though a higher activity level among the elderly would subsequently increase the volume of contributions to the first pension pillar, thus also reducing the state pension fund deficit.