WORLD BANK WARNS BOSNIA ABOUT PENSION SYSTEM

SARAJEVO, Bosnia (26.September,2007) - Bosnia’s two entities have undertaken substantial reforms of the pension funds, but the current system cannot continue in the long term, the World Bank warned yesterday.

“Current provisions, therefore, will mean that the pension systems will not be sustainable in the long run without further reform,” the World Bank said.

“Pension reforms in Bosnia should aim to ensure that citizens receive adequate incomes in old age without straining the finances of the government and unduly burdening those who contribute,” the World Bank said.

While the retirement age has been officially raised to 65 years in Bosnia, a number of features in the system provide incentives for people to contribute only for shorter periods, perpetuating employment in the grey economy.

The World Bank suggests that further reform of the Bosnian pension system should include establishing the contribution rate of 24 per cent of net wages; removing the option for women to retire at 60 ; abolishing the limits which penalize those who want to contribute more than 40 years; and introducing indexation of pensions to match inflation.

“These reforms would ensure sustainable pension system in Bosnia and secure adequate benefits to the elderly,” the World Bank newsletter said.