Text file: 11771.txt
author: freefox
downvotes: 0
end consideration date: 2020-07-21
id: '11771'
number comments: 6
number views: 358
proposal type: Competent authority response
response: 'Response by the Ministry of Labour, Family, Social Affairs and Equal Opportunities

  Pension and invalidity insurance in the Republic of Slovenia is based on the insurance
  principle, which basically means that the right to a pension is a pension and invalidity
  insurance entitlement arising from past service and based on contributions paid
  during the insured person''s active period. The length of pensionable service determines
  the percentage to be applied for the calculation of the pension. The amount of contributions
  paid depends on the level of the base, which means that a person with a higher base
  must also pay higher contributions. However, we would also like to point out that
  pension and invalidity insurance is based on the insurance principle, which basically
  means that entitlement to a pension and other rights arising from past service are
  granted on the basis of contributions paid and past service, and that there must
  be a proportionality between the contributions paid and the benefits from the scheme.    It
  should be added, however, that the pension insurance system in the Republic of Slovenia
  is not a pure "insurance" system, but is also a system based on the principles of
  reciprocity and solidarity. The principle of intra-generational solidarity or redistribution
  is ensured by our pension system through the limitation of the maximum pension base,
  which in turn means a drastically lower replacement rate for persons with higher
  incomes, while at the same time the contribution base is not limited. The current
  arrangements are mainly due to the fact that the system is characterised by a strong
  system of solidarity between individuals or redistribution within each generation,
  which is otherwise the case for social transfers, which pensions are clearly not.
  The system thus embeds vertical solidarity between the active and retired generations
  (contributions are compulsory and proportional to the contribution base; insured
  persons with higher salaries or incomes pay contributions from bases that are not
  capped upwards, while their rights are limited by the maximum pension base), horizontal
  solidarity between pensioners (maximum ratio of pensions for the same length of
  insurance period 1:4) and solidarity between pensioners who have retired at different
  times.

  The financial situation of pensioners is thus directly affected by the assessment
  of the pension from the lowest or highest pension base and by the minimum pension
  of 29.5 per cent of the lowest pension base. Under the Pension Protection and Guarantee
  Act (PIPZ-2), certain insured persons are guaranteed a pension calculated on the
  basis of the lowest pension base if the old-age pension, with the corresponding
  adjustments in the year of entitlement, calculated on the basis of the insured person''s
  completed pensionable life, does not reach the amount of the old-age pension for
  the same pensionable life calculated on the basis of the lowest pension base. A
  pension shall be calculated from the highest pensionable amount, which shall be
  four times the lowest pensionable amount, if the old-age pension, with the corresponding
  adjustments in the year of the exercise of the rights, calculated on the basis of
  the pensionable period of pensionable service from the insured person''s pensionable
  amount, exceeds the amount of the old-age pension for the same pensionable period
  calculated on the basis of the highest pensionable amount pensionable service from
  the highest pensionable amount.

  The principles of reciprocity and solidarity are thus principles which enable individuals
  who, although they have contributed to the scheme for 40 years, have had very low
  salaries during their active period, so that their contributions would not even
  have achieved the minimum pension, to retire with a decent pension calculated on
  the basis of the minimum pensionable earnings, which acts as a social corrective
  for them. The principle of solidarity or redistribution therefore ensures that these
  insured persons have higher rights than they would have had in relation to their
  pensionable period and the amount of contributions they have paid. The difference
  between the pension they would have received if they had contributed and the pension
  guaranteed by the statutory (public) pension system must be financed, partly to
  the detriment of individuals who have contributed for 40 years in excess of the
  maximum pension base, and partly to the detriment of the State, i.e. the active
  generation. Since the Slovenian public pension system limits the amount of the pension
  by law both upwards and downwards, and the maximum pension over and above the maximum
  pension base is capped at 4 times the minimum pension base, all the funds overpaid
  by these individuals through contributions are redistributed within the system and,
  from the point of view of the individual, act as a withholding tax. However, as
  there are still insufficient financial resources to pay all the benefits financed
  by the public pension scheme, the difference is made up by the State. Higher earners
  who, according to the criteria, would have a pension higher than the maximum amount,
  therefore receive a pension at the maximum amount, i.e. less than they would have
  received if their pension had been based solely on contributions. In this way, in
  accordance with the principle of solidarity, they provide resources for people with
  lower events during their working life, which contributes to higher social security
  for pensioners. The system of compulsory pension insurance is thus also solidarity-based,
  but it should not be overlooked that it is, after all, an insurance-based system,
  in which the level of the individual''s contribution during active life must also
  be respected to a certain extent.

  The Constitutional Court of the Republic of Slovenia, in its Decision No Up-360/05
  (of 2 October 2008, Official Gazette of the Republic of Slovenia, No 113/08, Official
  Journal of the RS, XVII, 85) on the essence or core of the right to a pension, took
  the view that the right to a pension is an individual''s right, on the basis of
  the contributions paid and provided that reasonable conditions are met, to acquire
  and enjoy a pension which guarantees him social security. As regards the content
  of the constitutionally protected core of the right to a pension, there is therefore
  no doubt that a pension is an expected entitlement, based on contributions paid,
  which will replace the pensioner''s salary in old age and guarantee a certain standard
  of living.

  The right to a pension, which is expressly provided for in Article 50(1) of the
  Constitution of the Republic of Slovenia (''the Constitution'') as part of the right
  to social security, is left entirely to statutory regulation by the Constitution.
  However, it is nevertheless clear from the Constitution that the right to a pension
  must be based primarily on the insurance principle. In this sense, a pension is
  a property right because it depends primarily on the duration and amount of contributions.
  This means that the pension must, to a certain extent, guarantee the continuity
  of the standard of living enjoyed by the insured person during his or her active
  life (income security), since the pension replaces, to a certain extent (pro rata),
  the income on which the pension contributions were paid. However, since the Constitution
  defines pension insurance as a type of social insurance, elements of reciprocity
  or solidarity are also constitutionally permissible in the system. Although the
  right to a pension is primarily of a property-law nature, this does not mean that
  the Constitution guarantees a pension of a certain amount. However, subject to the
  conditions laid down by law, minimum pensions must guarantee a social minimum, which
  does not simply mean a subsistence minimum, as provided for by social security benefits,
  but must also guarantee pensioners a certain standard of living (hereinafter ''adequate
  pension'') in relation to their work and contributions during their working life.
  In compulsory social pension insurance, as we have in Slovenia, the basis of the
  pension is, as already mentioned, the payment of contributions, which provide higher
  benefits than those applicable to social security benefits.

  We would also like to clarify that the ZPIZ-2C introduced the institution of a guaranteed
  pension for pensioners who have retired with a so-called full pensionable life.
  The amount of this pension, which is EUR 555.76 at the time of the latest adjustment,
  is of course unacceptable in terms of covering the cost of subsistence and a decent
  retirement income, but it exceeds the basic minimum income amount. However, it should
  be stressed that the pension and invalidity insurance system is an insurance system,
  where entitlements are granted on the basis of the length of pensionable service
  completed and, above all, on the amount of the salary on which the individual has
  paid contributions. If the pensioner''s earnings during the active period were low,
  the pension assessment is consequently relatively low. However, the pension and
  invalidity system in the Republic of Slovenia is strongly characterised by the principle
  of solidarity, which is reflected in the assessment of pensions for pensioners with
  the lowest incomes. The institution of assessment of pensions on the basis of the
  lowest pension base ensures that pensioners, irrespective of the length of pensionable
  life, are assessed on the basis of the statutory minimum pension base, which means
  a higher pension than the pensioner would have received on the basis of his or her
  actual earnings alone. However, as mentioned above, the ZPIZ-2C introduced the institution
  of a guaranteed pension for pensioners with full pensionable service, which unfortunately
  still falls below the poverty threshold and exceeds the basic minimum income. We
  would also like to clarify that the guaranteed pension has already increased by
  more than 11% since 2017.

  Finally, we would like to clarify that a significant step towards ensuring more
  dignified pensions has already been taken with the latest amendment to the Pensions
  Act-2G, which increases the pension assessment percentage for men and halts the
  decline in the assessment percentage for women. However, certain changes to the
  pension system should be made in the future, but they should be well thought out,
  should not create disproportionate differences between pensioners with different
  pensionable lives, should maintain appropriate ratios between pensioners in relation
  to the level of contributions paid, and should not place an excessive burden on
  the active generation. In this context, it should also be made clear that, while
  the aim should be to maximise the social security of pensioners, it is also necessary
  to ensure the long-term sustainability of pension funds. The key to securing higher
  pensions lies, above all, in the ability to ensure an economic environment conducive
  to higher value-added activities and thus higher wages, which are the basis for
  the assessment of pensions.

  Longer life expectancy also requires longer working lives, but simulations of increasing
  retirement age or pensionable life suggest that measures other than these will be
  needed to improve the long-term sustainability of the pension system in Slovenia.'
response date: 2020-08-04
response due date: null
sent date: 2020-06-19
title: Eliminate the disparity between minimum pensions (regardless of length of service)
  and social assistance.
upvotes: 41
url: https://predlagam.vladi.si/predlog/11771
