Pension Companies Want a Longer Working Life and Higher Contributions - Just Don't Touch the Second-Pillar Money

The pension companies marked twenty years of the second pillar with numbers and proposals. The numbers are their results. The proposals - a longer working life and higher contributions - are what employees would pay for.

At a press conference of the Association of Pension Fund Management Companies (ADPF), it was announced that over 20 years the funds achieved an average annual nominal return of 5.5 percent, and a real return, after inflation, of 2.3 percent. Anyone who started paying in back in 2006 now has three times as much money in their account in nominal terms, and 58 percent more real purchasing power. The total return the companies generated for citizens is 1.25 billion euros. According to deputy board chair Vesna Stojanovska, real returns in OECD countries range between 0.5 and 4 percent.

What they propose

The companies say average life expectancy in Macedonia has risen by about three years while the retirement age has stayed the same. So they propose a mix of measures: gradually extending working life, for example in steps up to 64 years and three months, a phased return of the pension insurance contribution towards its former 21.2 percent, and indexing pensions solely to the cost of living. Board chair Nikolovski stressed that if the state ever decides on a longer working life, the change should be announced well in advance and introduced gradually.

For now these are proposals in an expert debate, not decisions. But it's a conversation that affects every employee: how long they will work, how much of their salary goes towards a pension, and what kind of pension they get at the end. One retirement age for everyone doesn't mean an equal burden for someone in an office and someone who has done physically hard work for decades.

The money nobody may touch

The main message, though, was aimed at the government. Following hints that funds might be shifted from the second pillar to the first, state-run pillar, the companies warned that this would improve liquidity in the short term but leave a huge deficit for the years ahead. Board member Snežana Stanković pointed out that the second pillar manages 16 percent of all financial assets in the country and that the money in the accounts is personal property that can be inherited. Minimum pensions, she said, are a social measure of the state, not a burden for the funds.

So both sides have their own interest. The state wants money for today's pensions, the companies are defending the assets they manage, and the solution they offer is for people to work longer and pay in more. Who in this debate is loudly speaking up for the worker who is supposed to carry that burden?