31. Serbia

Aiming to create financially and socially sustainable pension systems, most European countries have undertaken reforms to increase employment at older ages and establish a balance between the number of years of contributing to a pension fund and disability insurance, and the number of years of receiving pension benefits (Jakovljevic et al. 2016a, b; Rancic and Jakovljevic 2016). Numerous measures have been undertaken to achieve these goals, such as increasing the retirement age, abolishing or reducing early retirement, and introducing stricter criteria for accessing a disability pension (Jakovljevic et al. 2017a; Rakić and Nikolić 2016; Jakovljevic 2015, 2017). A key measure recommended to member states for reforming pension systems to improve their financial sustainability and adequacy is to harmonise retirement age and increased life expectancy, which was implemented in specific degrees in different countries (European Commission 2018). Given that it is an economic imperative to maintain a healthy workforce and increase the number of older workers, this chapter provides a critical overview of the current pension system reforms and policy initiatives concerning extending working life in Serbia.

Historically, the retirement age in Serbia was not linked to increased life expectancy; it remained unchanged from the 1960s to the early 21st century (Jakovljevic et al. 2016a, b). Pension reforms in Serbia date back to 2001, when legislated pensionable age for full pension eligibility was increased from 60 to 63 years for men and from 55 to 58 years for women. The following reform, proposed in 2005, imposed even higher age limits for retirement and it was adopted at the beginning of 2006, with a phased implementation from 2008 to 2011. During this period, legislated pensionable age was raised by six months every year. This increased legislated pensionable age to 60 years for women and to 65 years for men by 2008, when legislated pensionable age was 58.5 years for women and 63.5 years for men.

According to the current Law on Pension and Disability Insurance, implemented since January 2015, legislated pensionable age for retirement will increase for both men and women, to reach age 65 by 2023, with the clear aim of equalising retirement ages and years of contributions necessary for a pension. Article number 19 of this Law states that an individual has a right to receive an old age security pension when s/he reaches 65 years of age and has a minimum of 15 years of service, or after attaining 45 years of service (Government of Republic of Serbia 2014). Besides the pensionable age, the other crucial factor is the number of years of contributions. Even though legislated pensionable age is the same for men and women, the requirements for years of contribution have differed. For women, the number of years of contributions has increased from 35 to 38 years, while for men it is 40 years. Legislation from 2020 specifies the standard pensionable age of 63 years for women and 65 years for men to qualify for retirement. The raise in standard pensionable age will affect women disproportionately. Taking into consideration the current gap in age limits and the equalisation of eligibility in terms of retirement age and years of service, women will have more adjustments to make than men and they will have shorter periods of time to prepare for these changes (Government of Republic of Serbia 2014).

Increases to legislated pensionable age are not always accompanied by an increase in the effective retirement age. To extend working life, in addition to increasing the legal retirement age or length of contributions required for retirement it is also necessary to reduce early retirement, or put another way, to extend working lives. In Serbia, early retirement is widespread. At the beginning of the second decade of the 21st century, about 70% of men and 50% of women retired before legislated pensionable age (Altiparmakov 2013). At this time, it was possible to retire at 55 years of age and with 35 years of service for men and at 50 years of age with 30 years of contributions for women. The reform that was launched in 2014 created much stricter qualifying conditions by increasing the minimum age for early retirement to 60 for both men and women, or 40 years of contributions, in gradual annual phases until the end of 2023. The tightened conditions for early retirement were accompanied by a 0.34% reduction in pension value for each month of retirement before the statutory age for legislated pension, which creates a permanently lower pension. Finally, apart from the obvious possibility of reducing the difference between the minimal legal retirement age and the introduction of major actuarial penalties and rewards for early or delayed retirement, there are also other measures to reduce early retirement. Firstly, it is necessary to improve the health care of older workers, improve the conditions that enable prolonged work, allow older workers to work part-time and to consider the introduction of partial retirement, i.e. the combination of pensions and work. Furthermore, it is important to reduce the number of privileged professions (such as police, civil servants, and military) which enable very early retirement.

Public pensions in Serbia are funded by the Pay-As-You-Go (PAYG) schemes, which means that the Republic Funds for Pension and Disability Insurance are obtained from the income of current workers. The contribution rate for mandatory pension insurance has been divided between employers and employees since 2013. Employers contribute 11%, employees 13%, and the remainder is financed from the state budget. The relatively low employer and employee contributions are the main weaknesses of this type of PAYG pension due to population ageing and a constant increase in the number of pensioning recipients in Serbia. There is no flexible opportunity in the current legislation on pensions that allows for simultaneously receiving pensions and earnings from paid work that could make longer working more attractive.

Several measures to lower the value of pensions in Serbia have been undertaken to preserve and stabilise the pension fund, which is in accordance with Statutory funded pension schemes. A defined benefit (DB) scheme of this reform was the replacement of the previous calculation system, based on the ten years with the highest income, with calculations based on earnings during the entire working life. This reform in 2003 was followed by a further step of pension freezing, which was implemented at the end of 2008. Pension freezing implied that there was no possibility of growth in pension value for the designated period. An additional step in this process was made in 2014 when, besides lowering pensions received before the age of 65, an additional measure consisting of a 20% decrease in pension value was applied for pensions above 200€ per month (calculated according to the available value for euro at the end of 2014) (Government of Republic of Serbia 2014).

The Serbian pension system is organised somewhat differently compared to most EU countries. Most EU countries have pension pillars organised at three levels, whereas in Serbia there are only two levels. The first level pillar is the public pension system, which provides mandatory pension and disability insurance. The other level is the third pillar of voluntary private pension insurance. This level of pension insurance system in Serbia was introduced in 2006. There is no second pillar—occupational pension schemes.

A special component of the Serbian pension system is disability retirement. Individuals have rights to disability retirement if they have a disability that interferes with employment without fulfilling the age criteria for pension eligibility. The precise conditions for the entitlement for disability pensions are defined in the Law on Pension and Disability Insurance, according to which the necessary condition for disability retirement is a complete loss of working ability. If a cause of working disability is an injury at work or an occupational disease, there are no special requirements concerning years of contributions. However, if a cause is an injury or a disease encountered outside employment, a person would need to have five years of contributions as an additional condition for disability pension eligibility.

The number of disability pensions in Serbia, according to the Statistical Annual Bulletin for 2018, showed that this kind of retirement has the lowest share, with only 16.6% in the total number of pension users with respect to family and retirement pensions (amounting to 20.1 and 63.3% respectively) (Pension and Disability Insurance Fund Republic of Serbia 2019). The number of claimants is lower than in earlier statistical reports, which may be explained by the changes introduced by the Law on Disability Insurance in 2003. Earlier requirements for disability retirement did not impose a complete loss of working ability but allowed a partial working disability, which resulted in significantly more disability pensioners. For example, in 1997 disability pensions accounted for 30% of all pensions. The value of a disability pension has been calculated in the same way as a legislated pension. The exception to the above-mentioned rules is insured persons whose disability occurred before the age of 30. If a working disability exists before the age of 20, then a person requires one year of insurance service. Individuals younger than 25 need two years of insurance service and for those younger than 30, three insurance service years are required.

Statistical reports on the causes of disability retirement in Serbia from 2008 to 2017 showed the trends in disease type, with the three most prevalent causes of working disability being tumours, diseases of the circulatory system and mental disorders. The data from 2017 showed that the distributions of the above-mentioned causes were 29.9, 27.0 and 9.8% respectively. In the future, increases in tumour diseases at older ages are likely to produce even more individuals claiming disability pensions. According to the current law, disability pension eligibility is reviewed after three years. The exceptions from the rules demanding a regular review are those persons above the age of 58 years and individuals with medical conditions where there is no possibility for health improvement. Deadlines are applied for disability pension eligibility reviews and if they are not undertaken in time, the disability pension is withdrawn.

The available data indicate that the average length of contributions for a disability pension in 2018 was 26 years for men and 23 years for women, while for a legislated pension it was 36 and 31 years of service respectively. In 2017, the average age of disability pension recipients was 68 for men and 67 for women, while retirement pension recipients averaged 72 and 70 years respectively. An interesting observation from the Annual Statistical Report is that the average number of years of receiving a disability pension until death was 20 years; 19 years for men and 22 years for women (Pension and Disability Insurance Fund Republic of Serbia 2019).

Based on data from the Republic Fund for Pension and Disability Insurance for 2018, the average pension value for all categories of pension was 250€ per month (calculated according to the available value for euro on the 13th of December 2018). The highest value was for retirees who had been previously employed, while the lowest rate was recorded for individuals from the agricultural sector (Pension and Disability Insurance Fund Republic of Serbia 2019). The structure of the pension systems does not allow people to be lifted out of poverty. There are no policies that address higher pensions in cases of retirement delay or auto-enrolment.

The basic characteristic of the labour market in Serbia is a high rate of unemployment, particularly for women, and the younger and older segments of the population. The available data show that the employment rate in Serbia is lower than in many other European countries. In 2007 it was 50% and it increased to 53.5% in 2008 (Matković et al. 2010). The average employment rate over an extended period was approximately 41.8% from 2008 to 2017 (Statistical Office of the Republic of Serbia 2017). The lowest rate of approximately 34.3% was recorded in the first quarter of 2012, while the highest rate of about 48.2% was recorded in the third quarter in 2017 (Serbia Employment Rate 2019).

According to the Europe 2020 strategy, the employment rate for the age group 20–64 should be 75% by 2020. The data from 2015 concerning the employment rate for persons in the age group 20 to 64 in EU-28 indicate a high rate of employment of 77.1%. However, the employment rate of men was 12.5% higher than the rate for women. In contrast to the activity rate for women for the EU (65.3%), for Serbia, it is slightly lower, with 62.1% of women aged 20–64 employed. Although the overall employment rates are lower in Serbia than the EU average, the gender gap in employment rates in the EU-28 was lowest in Serbia (less than 20%) during the given period (Eurostat 2016, 2018).

Unfortunately, Serbia’s unemployment rate is higher compared to the European average. In 2018, the unemployment rate was 14.7%, while the unemployment rate for the third quarter of 2019 decreased to 9.5% compared to the same period from the previous year, when it was 12.9%. During the period 2008–2019, unemployment rates in Serbia averaged 16.61%, reaching the highest point of 25.5% in the first quarter of 2012 and the lowest point of 11.8% in the second quarter of 2017 (Serbia Employment Rate 2019). Another characteristic of unemployment in Serbia, besides being high, is the duration of unemployment. Large numbers of the population have been unemployed for extended periods (one or more years), which undermines knowledge and working skill preservation. The main concern is that the skills of long-term unemployed individuals will be reduced and out of date as time passes.

Although the position of Serbian women in terms of equal access to the labour market has been significantly improved, gender differences in employment still exist. Women still have significantly lower activity rates, even though the disparity is lower today than it was in the past. Based on the Labour Force Survey from III Quarter 2019, the employment rate for all workers was 49.6%, while in the same period for 2018 it was 49.2%; 57.3% for men and 41.7% for women. Up to now there is no data about the unemployment rate for 2019 according to gender. The unemployment rate from III Quarter 2019 was 9.5%. Data from 2018 showed that distribution of this rate regarding gender was 10.5% for men and 12.2% for women. Women’s labour market inactivity in Serbia reflects broader gender norms: the extent of their unpaid work in households, inadequate support to women in reconciling work and family responsibilities, employers’ discriminatory treatment of young women, the existing wage gap, women’s lower statutory retirement age, as well as the existence of a statutory minimum social insurance contributions base which discourages formal part-time work, an option more commonly used by women with family responsibilities in other countries (Government of the Republic of Serbia 2016). The differences between men’s and women’s participation are most visible in older age groups (from 55 to 64 years), among those with low education, and in rural settlements (Milovanovic et al. 2016).

In Serbia, over the last two decades, the unemployment rate among individuals older than 50 years has been very high and this is perceived as a major problem. The inactivity rate of older Serbians was 59.1% in the fourth quarter of 2014, which is equal to that at the beginning of the financial crisis (October 2008), and rates had only slightly improved with respect to the peak of the crisis (October 2011), when it was 63.5% (Employment and Social Reform Programme in the Process of Accession to the European Union 2016). The explanations for the high unemployment of older Serbians may be different from those relevant for other European countries due to privatisation and reconstruction that happened after the world financial crisis, when bankruptcies and liquidations occurred daily in most cities across Serbia (Serbia Foreign Policy and National Security Yearbook 2014). The gender employment gap is most pronounced among older workers. Among workers in the 55–64 age group, the gap is 18.7% because of the higher inactivity rate among women (66.3% vs. 41.5% among men) (Žarković-Rakić and Vladisavljević 2016). The greater economic activity of men compared to women can be partly explained by gendered differences in education, unpaid care giving in families, and the position of women in this age group in terms of opportunities for professional training and opportunities on the labour market. Other possible reasons for gender differences in the economic activity of older workers could also be related to different positions in terms of entitlement for retirement and the early exit of women from the labour market. Regarding specific employment policies covering issues such as training for older workers, flexible employment, the creation of proper working conditions for older workers and work after retirement, Serbia has not yet created any well-designed policies which could effectively deal with these issues.

Another important aspect when considering pension reforms is the effect of extending working life on health and differentiating the gender effects (Jakovljevic and Laaser 2015; Jakovljevic et al. 2015, 2017b; Jakovljevic 2016; Ogura and Jakovljevic 2014). Currently, little research on extending working life has been carried out in Serbia that recognises gender differences in health issues. A citizen’s own health status perception is a significant indicator of overall quality of life. According to the Serbian National Health Survey, 21.4% of respondents in the age group 50–64 evaluated their health as poor (17.9% as bad and 3.5% as very bad), while 37.9% of respondents assessed their health as good (31.2% as good and 6.7% as very good). Women more often evaluated their health as poor (24.8% with 4.0% as very bad and 20.8% as bad), while men evaluated their health more positively (17.5% with 3.0% as very bad and 14.5% as bad) (The Institute of Public Health of Serbia 2013).

Among Serbians aged 50–64, 73.2% of the respondents reported having at least one of the 17 examined chronic diseases and conditions: 24.2% with only one and 49% with two or more chronic diseases (multimorbidity). The most common diseases were hypertension (48.5%), deformities of the lower back and neck, or other chronic back problems (26.1%), elevated blood lipids (22.5%), coronary heart disease or angina pectoris (13.6%) and arthritis (13.1%). A significantly greater incidence of chronic diseases has been observed in women compared to men (80.4% vs. 64.7%). Symptoms of depression were present in 10% of older Serbians and this rate was significantly higher among women (12.6%) than among men (6.5%) (The Institute of Public Health of Serbia 2013).

Just over one third of the respondents in the 50–64 age group had at least some difficulties in mobility (38.4%), and difficulties in performing everyday activities (31.6%), and almost one in ten older Serbians had difficulties in performing activities of daily personal care (9.6%). Women were more likely than men to report difficulties in performing everyday domestic activities, while men more often than women reported needing other people’s help in performing most daily activities (The Institute of Public Health of Serbia 2013). Given that the benefits of longer life expectancy can only be fully achieved if additional years are spent in good health, further studies of gender differences among older Serbians are needed. These could provide information for the development of an action plan to address gender differences in health status and promote healthy, active ageing for both men and women (Jakovljevic et al. 2018) and, by extension, improve their ability to extend working life. It is crucial to integrate a gender perspective of public health and to acknowledge gender differences and inequalities so that they can be considered when policies, programmes and strategies are implemented, since these should take into consideration the specific needs of women and men at older ages.

The debate on extending working life in Serbia has in general been held only among policy makers. The need to keep Serbian’s ageing population economically active has prompted government policies aimed at extending working lives. The problems of financing the pension system were originally observed in the mid-80s, due to the deficit in the public pension system. In the period 1980–1990, workers opted for early retirement, as soon as they reached the minimum legal requirements. Increasing the retirement age in the government programme in Serbia was first implemented in 2001 by extending the minimum age limits of eligibility for retirement from 60 to 63 years for men, and from 53 to 58 years for women. The retirement conditions within the statutory pension scheme have been amended several times since 2003, the latest amendments being introduced in 2014. The 2014 pension reform imposed a phased-in equalisation of the retirement age for women, raising it to 65 by 2032, and introduced penalties for early retirement. The 2014 fiscal-consolidation measures have imposed cuts on pensions above the national average.

Government and representatives of employees viewed the proposed amendments to the Law on Pension and Disability Insurance in different ways. According to the Government, reforms should ensure the stability and sustainability of the pension system and prevent early departure from the labour market. However, according to the representatives of employees, the adopted measures are less acceptable because of a negative impact on the quality of life of future retirees, especially those with hard physical jobs, or women who, in addition to paid work, have to work full-time at home, and those who have lost their jobs and have no chance of re-employment in the labour market. The representatives of employees also believe that any increase in the retirement age is directly harmful to young unemployed citizens of Serbia. In 2017 the Ministry of Labour, Employment, Veterans and Social Policy established a working group to consider amendments to the current Law on Pensions and Disability Insurance. There have been no announcements on planned changes. Public debate has been lacking.

Lately, public discussions have been more focused on the elimination of pension cuts, than on the extension of the age limit. The Association of Autonomous Trade Unions of Serbia has expressed dissatisfaction with the ‘penalty measure’ for workers under 65 years of age at the time of retirement. Amendments to the Law on Pension and Disability Insurance in 2018 abolished the law on reducing the level of pensions. MPs of the opposition parties and the Fiscal Council negatively assessed proposed amendments to the Law on Pension and Disability Insurance which, in addition to the abolition of the law on the temporary reduction of pensions, also abolished the formula for pension adjustments and gave the Government discretionary possibilities to pay a ‘monetary increase’ to pensions. However, even though the statutory retirement age is now progressively increasing to 65 years, it is a scarcely discussed subject.

If the initiative to change the labour law passes, Serbia might extend working life to 70 years of age for those who wish to remain active. Employees could voluntarily remain active to up to five years after they meet the requirements for an old-age pension, providing that the employer needs their services at the same time. The new legislation covering possibilities of employment for those older than 65 allegedly would not interfere with the existing Law on Retirement and Disability Insurance.

The move for extending working life will be addressed to the ministries in charge, which have the authority to propose amendments and additions to the labour law to the Serbian Government. The final authority on the matter lies in the hands of the Serbian Parliament.

In order to develop a high quality of life for older men and women in Serbia, officials need more scientific evidence that could help policy makers develop adequate policies and programmes aimed at reducing gender differences in the quantity and quality of years lived, improving opportunities for people to extend working life if they so desire or to retire from paid work at appropriate times, and provide equal opportunities for both men and women. According to the data presented in this chapter, there is insufficient research on older people in Serbia to support age and gender sensitive policies. Official policies on issues ranging from active ageing, age discrimination, lifecourse and end-of-career psychology and management are still in their initial stages of implementation in Serbia. The establishment of appropriate legal frameworks and research initiatives could open this research area, with the potential for more precise monitoring and a deeper understanding of the issues in the foreseeable future. To date, employment policies for older Serbian workers remain mostly underdeveloped. The population is somewhat left to itself to provide income security in later life, either by being supported through the social and pension systems via government provided measures or, in a more traditional way, through their own families.