Svrkota: Pensions will be funded primarily through consumption taxes, while workers will have to invest in their own retirement

What will the new „Euro model“ bring, and will workers who have paid contributions for decades lose some of their accrued entitlements? Will years of service and previous contributions carry the same weight in pension calculations, and what will happen to the money workers have paid into the pension system? These are among the questions raised by the proposed change in the pension financing model.

Economic analyst and cryptocurrency expert Novak Svrkota told Portal ETV that it is still unclear what the pension calculation formula will look like following the transition from the Bismarckian to the Beveridge model, and that differences in how years of service are treated could become a source of discontent.

- The pension calculation formula following the transition from the Bismarckian to the Beveridge model of financing remains a mystery. One potential source of dissatisfaction is the equalisation of pension entitlements regardless of the number of years of contributions paid. Under the new model, however, even people with no years of service will be entitled to a pension - Svrkota said.

Speaking about the contributions workers have paid over decades, Svrkota explained that the money was not held in individual accounts belonging to insured persons, but was instead used to pay pensions at the time.

- I am not a lawyer, but logically speaking, all those contributions were not paid into separate savings or investment accounts belonging to insured persons. Instead, they were used to pay pensions at the time, on the understanding that future pensions would be financed through future contributions. Now, pensions will be financed primarily through consumption taxes rather than contributions - Svrkota said.

He therefore believes that current employees should consider additional forms of saving and investment to ensure their financial security in retirement.

- People who are currently employed and will eventually retire should consider making additional investments to secure their financial future - Svrkota said.

He also pointed to the rapid development of artificial intelligence and robotics as an additional challenge to the sustainability of the pension system. In his view, these developments could transform the labour market and reduce the number of people in employment.

- One factor that nobody is taking into account is the rapid development of AI and robotics, which will lead to increased productivity and a reduction in the number of employees. This means that a contribution-based model would be difficult to sustain, both because of this factor and because of population ageing - Svrkota argued.

Finally, he offered advice on what workers should do with part of their income.

- They should invest part of their income over the long term in order to enjoy greater financial security in retirement - he concluded.