Pension Reform in 2005

At the beginning of 2005, earnings-related pensions underwent the most extensive reform in their then 40-year history. It affected nearly all new pensions starting after the reform took effect.

The aims of the reform was to postpone the average effective retirement age by 2-3 years and to adjust the pension scheme to the average increase in life expectancy. At the same time, the prerequisites for the 2007 consolidation and simplification of the earnings-related pension acts applied to private-sector employees were created.

Prior to reaching agreements, the decision-makers of the earnings-related pension scheme, i.e. the labour market organisations, had prepared the reform for a long time in the negotiation group of the labour market central organisations.

The most important mile stones in the preparations of the 2005 pension reform were the November 2001 agreement of the labour market organisations and the September 2002 supplementary agreement. In November 2001, agreement was reached on the principle policies, while the determining of pensions was agreed on in September 2002. In that agreement, the most crucial issue was that the pensionable earnings were to be determined on the basis of the earnings throughout the entire working career.

Key amendments:

  • flexible retirement on old-age pension between the ages of 63 and 68
  • a cut in early retirement pensions and an increase in their lower age limits
  • pensions accrue on the basis of earnings throughout the entire working career
  • social benefits accrue pension to a greater extent than before
  • the lower insurance age limit set at 18 and other amendments affecting the young
  • the life expectancy coefficient introduced for those born after 1947
  • introduction of wage coefficient and earnings-related pension index
  • right to rehabilitation
  • an increased contribution for older wage earners and a flexible contribution for the self-employed