The World Bank proposes thorough changes to Croatia's pension system, including extending working life to the age of 72, mandatory pension payouts from the second pillar, and limiting early retirement.

The main goal of these recommendations is to ensure the long-term sustainability and adequacy of pensions in the context of an aging population and limited budget resources.

This recommendation comes as part of an extensive analysis prepared at the request of the Ministry of Labour, based on the PROMIS microsimulation model and involving cooperation with HZMO and REGOS. The analysis points to several key problems: Croatians retire early on average, their working lives are too short, and the ratio of employed people to pensioners is worryingly low.

One of the World Bank's proposals envisages that by 2065 the age for full retirement would increase to 72, while early retirement would be possible no earlier than at 69. Such a shift in the limits is justified by the need to improve the ratio of the active population to pensioners, which no other measure can achieve as effectively, the report states, as reported by mirovina.hr.

The analysis also highlights that most current challenges can be resolved by strengthening the pension indexation formula, limiting supplements that are not tied to actual contributions, and enabling a fairer choice of pension options.

Particularly emphasized is the need to abolish the free choice between pension payouts from the first and second pillars, because the current rules allow decisions that can undermine the stability of the system.

It is also interesting that the expected healthy life expectancy in Croatia for people older than 65 is significantly lower than the EU average - only 5.2 years compared to the European 9.9. This means that most Croatian pensioners feel the consequences of poorer health very soon after retirement.

The analysis also acknowledges that the three-pillar system is sustainable, but only with additional adjustments that include automated investment models in the second pillar, fairer distribution, and incentives for a longer working life.

The European Commission also proposes similar measures: discouraging early retirement, gradually increasing the age limit, reforming the taxation of pensions, and better protection for the most vulnerable. Croatia is currently implementing some of these recommendations, but without raising the statutory retirement age. Instead, longer work is encouraged through financial bonuses and the possibility of working while receiving half a pension.

However, as the World Bank analysis shows, without a thorough reform including the age limit, the long-term sustainability of the system remains in question.