Don´t Touch Slovak Pension System!

Mummelgrummel || Creative Commons

This was the crux of OECD Secretary-General Angel Gurría´s speech he gave while visiting Slovakia in February this year. He added that many countries dreamt of tying the age of retirement to life expectancy. And we are trying to abolish this system.

It was ironic to see Slovak Ministers Žiga and Kažimír seated behind Mr Gurría as he was delivering his message. The two ministers are members of Smer-SD´s top leadership, a party advocating the constitutional implementation of a fixed upper limit for the age of retirement at 64.

It is extremely unlikely that the OECD Secretary-General would talk off the top of his head. It is much more likely that he spoke after consulting the two ministers. That says a lot about the state of Slovakia´s strongest political party, where opponents of silly policies must call foreign authorities for support.

Turning back to the pension system – this idea is utter nonsense. Whether we like it or not, fixed retirement age or any long-term guarantees for dozens of years do not have their place in future considerations. The only certainty of the future is uncertainty.

Pretending to be able to cover that with fixed retirement ages or financial guarantees is a total fallacy.

An Old-Fashioned Pension System

We are now facing new factors that require more flexibility and less fixation. Different working habits that are expected to take prime in the future are the most important of such factors.

People will not work in 9-to-5 jobs and they won´t have one or two jobs throughout their lives. We will all be freelancers hired for specific projects in a way that´s different from a traditional employment contract.

The state will have big trouble financing the current system in the future. It won´t be able to pass laws and regulations fast enough to tax and levy these new forms of employment.

The current Slovak pension system is 130 years old. Bismarck´s model of financing the pension system through taxes was gradually adopted by all European countries.

This system was adopted in a time when people used horses for transportation. We have seen many significant changes to transport since then. But pension systems remained largely the same. This is unsustainable.

Today´s debate shouldn´t be about one party proposing absolute nonsense while the rest just adjusts and polishes. A glazed delusion is still a delusion.

We should get back to setting up a sustainable pension system. We are fundamentally underestimating factors with a great future role that could cause the financial collapse of our current system. The state simply won´t have enough money to finance it.

Finance the Family, Not the State

One solution to the problem of pension systems is bringing back efficient and customised financing of pensions via families. A pension´s major part should not be composed of state money given to the pensioner or his savings.

Rather, it should be based on what his children pay back via taxes and levies, or what the state transfers from children´s accounts to their parents´ pension accounts. And not to the dark hole of the state budget or Social Insurance.

This could fix many problems. It´s a family-friendly policy that motivates citizens to have children.

What´s more, it provides motivation to actively care for the financial success of children in terms of regular income. This would partly mend the pertinent problem of education in our country.

The governing coalition and its opponents found a way to sit at the same table when debating the legislation on budget responsibility. This should set the standard in the Slovak Parliament. The looks of our pension, education, and health systems and services should not depend on the government holding power at any given time. Instead, a fundamental political consensus is required.

Better than calls from abroad for Slovakia to behave more rationally, the nation itself must come to its senses.

Continue exploring:

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Aging Polish Society and the Naive Law and Justice’s Pension System Retro-Reform

Lithuania Reforms Tax and Pension Systems

Jan Oravec