The Serbian Old Age Security System in 2020

By Filip Bojić, University of Belgrade

The development of the Serbian old age pension system dates back to the 19^th century when the country regained its independence. Originally, at the discretion of the ruler, pension beneficiaries were distinguished individuals only, as well as participants in the First and Second Serbian Uprising. On the basis of the first constitution of Serbia, the Sretenje Constitution adopted in 1835, the right to old age pension was extended to civil servants. Since the mid-1860s, the right to old age pension had been provided to members of the military. After the First World War, Serbia became part of the Kingdom of Serbs, Croats and Slovenians. In 1937, old age pension rights were extended to enterprise employees. After the Second World War, special regulations on pension insurance were implemented in socialist Yugoslavia. During the 1990s and after the dissolution of the Social Federal Republic of Yugoslavia, the rights for pension and disability insurance were regulated by the laws of the Republic of Serbia. In 2003, the Law on Pension and Disability Insurance (Закон о пензијском и инвалидском осигурању) was adopted and remains in force until today, albeit with a large number of amendments implemented in the last 10 years. It is important to note that the World Bank three-pillar pension system has not been implemented in the Serbian pension insurance system. Nowadays, ‘standard protection’ of old age security is provided through mandatory insurance in a single public pension scheme. In addition, benefits of the public pension can be ‘topped up’ by voluntary insurance in private pension schemes. A ‘minimum’ level of protection is guaranteed by the minimum pension level of the public scheme and means-tested social assistance measures.

Standard Protection in Old Age

The majority of the economically active population is mandatorily insured in the statutory pension and disability insurance scheme  (обавезно пензијско и инвалидско осигурање) that is financed on a pay-as-you-go (PAYG) basis. The acquiring and exercising of pension rights depends on the length of insurance and the contribution base, combined with the application of the principle of solidarity. These rights are exercised in a special procedure administered by the Pension and Disability Insurance Fund of the Republic (Републички фонд за пензијско и инвалидско осигурање). Contrary to the practice in socialist Yugoslavia, there are no more special pension schemes for farmers, the self-employed and military personnel. The unification into a single pension scheme took place in 2008 and 2011. Apart from the standard retirement conditions, special rules apply to insured persons who work in particularly difficult and hazardous jobs who have the right to retire at an earlier age. Among others, these are police officers, members of the Security Information Agency, members of the Military Security Agency, some employees of the Directorate for the Execution of Criminal Sanctions, and professional military personnel. For these groups, insurance periods are re-evaluated depending on the weight, danger and harmfulness of the work. The increase in insurance periods for the purposes of pension entitlements can amount to up to a maximum of 50% (for instance, 12 months of work in hazardous jobs can be calculated as if the employee had worked for 18 months).

Top-Ups

Public pension benefits can be topped up by private pension insurance in voluntary pension insurance schemes  (добровољно пензијско осигурање), established by the Law on Voluntary Pension Funds and Pension Plans (Закон о добровољним пензијским фондовима и пензијским плановима) enacted in 2005. Employers can also voluntarily pay contributions for their employees into these schemes based on employee plans or collective insurance agreements. However, these are not separate occupational pension schemes such as they exist in a number of countries. This private type of insurance is available to all persons residing in the Republic of Serbia – also to those who are not mandatorily covered by statutory pension insurance. The voluntary pension insurance schemes are based on the capitalisation of funds, with invested funds being allocated to individual accounts managed by private pension plan providers. There are currently four management companies operating in Serbia that manage the assets of seven voluntary pension funds. Participation in the schemes is incentivised by tax exemptions on the employer’s contributions (up to a certain threshold).

Minimum

The statutory pension and disability insurance scheme provides minimum benefit levels to those who are entitled to a public pension but whose pension is lower than the thresholds determined by law. There are different minimum pension amounts set for, on one hand, employees and the self-employed, and, on the other hand, the insured farmers. At the end of 2020, almost a third of the total number of public pension beneficiaries were entitled to a minimum old age pension. Outside of the pension system, persons who do not meet the conditions for old age pension can apply for minimum income provided by the means-tested social assistance in material
need  (систем социјалне заштите за лица која се налазе у стању социјалне потребе).