pension reform and social security governance in the slovak republic turin, june 2006
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Pension reform and Social Security Governance in the Slovak Republic Turin, June 2006 Mária Svoreňová. 1. Pillar pay-as-you-go financed Social Insurance Agency (SIA) collects contributions and pays pensions regulated by the Act No. 461/2003 Coll.of Laws on Social Insurance. 2. Pillar - PowerPoint PPT PresentationTRANSCRIPT
Pension reform and Social Security Governance
in the Slovak Republic
Turin, June 2006Mária Svoreňová
Statutory pension insurance
• 1. Pillar
• pay-as-you-go financed
• Social Insurance Agency (SIA) collects contributions and pays pensions
• regulated by the Act No. 461/2003 Coll.of Laws on Social Insurance
• 2. Pillar• saving on personal accounts in
pension fund management companies (PFMC)
• SIA collects contributions for pension funds
• pensions are paid by insurance company and by PFMC
• regulated by Act No. 43/2004 Coll. of Laws on Old-age Pension Savings
Pension insurance reform goals
• financial sustainability of scheme
• resist to the ageing of population
• reduce number of pensioners
• provide more decent pensions
• introduce principle of fair replacement rate
• equal rights of women and men in pension scheme
• increase employment of elderly
Trade Unions demands and expectations• Protection of strong and sustainable PAYG pension scheme
• Introduction of wage based calculation of pensions but
• With a strong solidarity principle
• Providing a minimum pension benefit for low income workers
• Slower increasing of the retirement age for women and
• 60 years of retirement age for both genders
• Providing working places for people at the age before retirement
• To sustain claims of pensioners and insured persons reached in the old pension scheme (such as disability benefits, value of pensions etc.)
• Social dialogue about introduction of multi-pillar pension reform
• different calculation of pensions
• introduction of early retirement
• possibility to receive old-age pension along with earning wage or self-employment
• equal pension conditions for widows and widowers
• abolishing statutory minimal income of pensioner
• increasing retirement age
Changes in pension scheme
Negative impact of pension reform • Financial stability of old-age pension insurance has been
deteriorated by redirection of 9 % of contributions into second saving pillar
• Deficit of PAYG pillar will grow significantly
• Multi-pillar reform will lead to fiscal deficit of the state - stability pact of the EU: 3 % of deficit should be fulfilled
• Stock market is not developed enough and pension funds have problems to place assets
• lack of money will lead to reduction of pension indexation
• II pillar does not solve the expected demographic problem
• non-contributory benefits are needed to protect elderly against poverty
• standards of the ILO Convention No. 102 for old-age pension would not be sustainable
• Retirement age for women rises from 53-57 to 62• women who were born in will retire as 62 in
• without children 1953 2015• with one child 1955 2017• with two children 1958 2020• with 3-4 children 1960 2022• with 5 and more 1962 2024
• Retirement age rises for men from 60 to 62• all men who were born in 1946 and later will retire as 62
year old from 2008
Increasing retirement age by 9 month every calendar year since 2004
Pension insurance contributions• Type Contributors Contributions in %• of Insurance Only I. Pillar I. Pillar II. Pillar• Employer 14 5 9• Employee 4 4• Old-age Pension Self-employed 18 9 9• Insurance Voluntarily insured 18 9 9• State 18 9 9• SIA 18 9 9• Employer 3• Disability Pension Employee 3• Insurance Self-employed 6• Voluntarily insured 6• State 6• _______________________________________________________________________• Pension Insurance – Total 24• _______________________________________________________________________• Employer 4,75• Reserve Self-employed 4,75• Fund of Voluntarily insured 4,75• Solidarity State 2•
•
•
•
•
•
Pension beneficiaries of EU, 2003 Source: Eurostat
0.0
5.0
10.0
15.0
20.0
25.0
30.0
IT DE EL(1)
SE LV PT BE EE AT ES HU UK FR FI DK LT SI(2)
CZ LU NL MT PL CY SK IE
Priemerný počet poberateľov dôchodkov 2003 (% z populácie)
populácia vo veku 60 a viac rokov (% z populácie)
Population structure in Slovakia, 1990 and 2002
250 200 150 100 50 0 50 100 150 200 250
0 - 4
10 -14
20 -24
30 -34
40 -44
50 -54
60 -64
70 -74
80 -84
Men02 Womem02 Men90 Women90
Women Men
x100
Source: SO SR
Number of Pensions Development, 2002, 2003, 2004 and 2005
Source: Social Insurance Agency
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
2002 2003 2004 2005
Old Age Pension Early Retirement Pension Disability Pension
Widows Pension Widowers Pension Orphans Pension
Number of old-age pensions by benefit amount, 2003 and 2004
Source: Social Insurance Agency
31 524
44 672
517 942527 334
38 216
15 507
1 3390
3860 90 0 43
0
0
100 000
200 000
300 000
400 000
500 000
600 000
Sk
do 4 899 4 899 - 9199
9 200 -14 999
15 000 -19 999
20 000 -24 999
25 000 -29 999
30 000aviac
rok 2004 rok 2003
Number of old age pensions divided under their value and gender
Source: Social Insurance Agency
3 849
27 675
235 436
282 506
29 951
8 265902 437 258 128 70 20 39 4
0
50 000
100 000
150 000
200 000
250 000
300 000
in SKK
men 2004 3 849 235 436 29 951 902 258 70 39
men 2003 4 061 257 270 13 573 0 0 0 0
women 2004 27 675 282 506 8 265 437 128 20 4
women 2003 40 611 270 064 1 934 0 0 0 0
do 4 899 4 899 - 9 199 9 200 - 14 999 15 000 - 19 999 20 000 - 24 999 25 000 - 29 999 30 000and more
Development of Number of II Pillar Contributors, 2004-2005
Source: Social Insurance Agency
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
insured 932 720 1 021 270 1 047 026 1 080 316 1 103 575 1 139 586 1 178 084
stepped over 19 500 35 542
to 31 May Jul August October January February March
Number of II Pillar Contributors by age, 1 May 2005
Source: Institute for Financial Policy
138 850
359 000
267 501
50 003
270 18
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
15-25 26-35 36-45 46-55 56-65 nad 66
Share of pension fund management companies (PFMC) assets at the market
Source: MLSAF
5%
31%
6%12%
17%
29%
1. AEGON d.s.s. 2. Allianz - Slovenská d.s.s. 3. ČSOB d.s.s.
4. ING d.s.s. 5. VÚB Generali d.s.s. 6. Winterthur d.s.s.
Revenues and Expenditures of SIA on Old Age Pensions, 2004 - 2010
Source: Social Insurance Agency
68 68571 866
60 638
79 222
54 775
89 031
51 415
95 534
53 107
99 719
54 924
105 529
56 763
110 429
59 130
115 203
0
20 000
40 000
60 000
80 000
100 000
120 000
in SKK
Budget2004
Proposal for2005
ExpextedBudget
2005
Proposal for2006
Forecast for2007
Forecast for2008
Forecast for2009
Forecast for2010
Revenues Expenditures
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
PL
SK
AT SI
BE IT LU
MT
HU
FR
EL
EU
25
ES
DE
CZ
NL
LT
LV IE CY
PT FI
EE
UK
DK
SE
2000 2004
Employment rate of persons aged 55-64, EU-25, 2000-2004, in %
Source: Eurostat
Life expectancy at birth by gender, EU-25, 2002
Source: Eurostat
0
10
20
30
40
50
60
70
80
90
eu25
be
cz
dk
de
ee
gr
es
fr ie it lv lt lu
hu
mt nl
at
pl
pt
si
sk fi
se
uk
men women
Social Insurance Agency (SIA)• Is public-service organisation established to carry out
social insurance.
• SIA is a liaison institution to communicate between appropriate institutions and beneficiaries and between institutions of member countries of the European Union.
• SIA is a legal person and the headquarters is registered and established in Bratislava.
• It has also branches on the whole territory of Slovakia.
Social Insurance Agency (SIA)
• is only institution governing: • pension insurance (which consist of old-age insurance and
disability insurance),
• sickness insurance,
• occupational injury insurance,
• unemployment insurance,
• guarantee insurance,
• Solidarity Reserve Fund and• redirect contributions to pension funds (II pillar).
Bodies of the Social Insurance Agency
• Supervisory board
• Board of Directors
• Branches Directors
Supervisory Board of the SIA
• is the tripartite governing body.• it has 15 members:
- 5 designated by representative associations of trade unions and interest associations of citizens, representing beneficiaries of pension benefits,
- 5 designated by associations of employers, and- 4 designated by the Government.
Supervisory Board members • representing associations of trade unions
and interest associations of citizens are as follows:
- two members are nominated by the Trade Unions Confederation of the Slovak Republic – KOZ SR (representing employees – contribution payers),
- one member is nominated by the Slovak Pensioners’ Union (representing pensioners – beneficiaries of old-age pensions),
- one member is nominated by the Slovak Union of Disabled (pensioners – beneficiaries of disability pensions),
- one member is nominated by the Slovak Humanitarian Council (representing NGO acting in social field)
Supervisory Board members
• representing associations of employers
are as follows:- three representing AZZZ (Federation of
Employers‘ Associations of the Slovak Republic)
- two representing RUZ (Republic Union of Employers).
Supervisory Board members• Four members are designated by the
Government.
• The president of the Supervisory Board is the Minister of Labour, Social Affairs, and Family.
• Except for the President, Members of the Supervisory Board are elected and removed by the National Council of the Slovak Republic (the legislature).
• The office period of the Supervisory Board is five years.
Supervisory Board’s responsibility • Checks economic management of the SIA regarding all
insurance funds• Checks adherence to the Social Insurance Law and
other general binding legal regulations• Discusses draft financial statement of the SIA, annual
report• Imposes the Board of Directors to take measures to
remove drawbacks found out,• Approves salary and other emoluments of the Board of
Directors• draws up a report about auditing of the SIA
Board of Directors of SIA• Consist of five members:
- President of the Board and
two Vice-Presidents are nominated by the MLSAF,
- one member - by representative associations of trade unions and interest associations of citizens
- one member - by representative associations of employers.
Board of Directors of SIA
• Members of Board of Directors are appointed and removed by the Government of the SR and the office period is five years
• Member is non-substitutable in performing his/her office
• Controls the SIA
• Approves the annual report of SIA and submitting it to the Supervisory Board
Board of Directors’ responsibility
• Discusses draft budget of the SIA with assumed development for next years and financial statement of the SIA
• Approves the statutes of the SIA, rules of organization, work order, payment rules, rules of inspection, rules of funding and economic management and also its own rules of procedure
• Appoints and removes managerial workers of the Head-office of the SIA and directors of branches of the SIA
Conclusions
• Good social security governance needs social dialogue and consensus among all actors (Government, trade unions and employers)
• All partners are responsible for building up the trust among public in the institution providing social security
• Members of the Supervisory Board as well as the Board of Directors should cooperate with pension specialist and be familiar with their roles in the organization.
Thank you for your attention!