Croatia is planning to create a private pension system.
As part of broad reforms of the central government's fiscal systems, the government is now working on a three-tiered retirement program to replace the current pay-as-you-go arrangement.
The plan is to create a mandatory, fully funded, defined contribution program that would work in conjunction with a much smaller pay-as-you-go program. A third, pillar would be a voluntary system whose assets would supplement the existing two-tiered retirement program.
In the first two tiers, contributions would come equally from employers and employees. That arrangement would not be required for the voluntary plan.
The government tentatively set age 45 as the cut-off for participation in the new scheme; once it's set up, those above age 45 would stay in the current program.
The government hopes the new three-tiered system will be in operation "preferably before 1998," said Zoran Anusic, Croatia's assistant minister of finance. As a precursor, Croatia's parliament needs to pass legislation - now in draft form - that regulates and changes the pay-as-you-go system. After that, the parliament will need to pass two more pieces of enabling legislation - a law on investment funds and one creating a private pension system.
According to Mr. Anusic, the moves are "part of total public sector reform in Croatia. We are initiating this because we want to achieve a solid and sustainable market economy."