Options for reforming early retirement system for special and hazardous occupations in Montenegro June 25, 2017 Document of the World Bank Acknowledgements This report was prepared by Agnieszka Chłoń-Domińczak (Professor, Warsaw School of Economics) and Danijela Vukajlović-Grba (Advisor to Vice Governor, Central Bank of Montenegro), in their roles as consultants to the World Bank pension policy team for Montenegro. The Report was prepared as part of the Western Balkan Pension Advisory Services and Analytics, led by Anita Schwarz (Lead Economist, ECSH3), at the request of the Government of Montenegro. The team benefited from comments from Melis Guven and Rafael Rofman. The report was prepared under the overall supervision of Andrew Mason, Sector Manager, Social Protection (ECSH3). Standard Disclaimer This report is a product of the World Bank Group. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 2 List of contents: EXECUTIVE SUMMARY .................................................................................................................. 4 INTRODUCTION ............................................................................................................................ 7 1. DEMOGRAPHIC AND LABOR MARKET CONTEXT ......................................................................... 9 1.1. DEMOGRAPHIC DEVELOPMENTS .......................................................................................................... 9 1.2. LABOR MARKET SITUATION IN MONTENEGRO ...................................................................................... 10 2. PENSION SYSTEM SITUATION .................................................................................................. 15 3. EARLY RETIREMENT IN MONTENEGRO .................................................................................... 21 3.1. OLD-AGE PENSIONS ......................................................................................................................... 21 3.2. EARLY RETIREMENT ......................................................................................................................... 24 3.3. WORKPLACES AND JOBS SUBJECT TO ACCELERATED SERVICE PERIOD ........................................................ 29 3.4. SUPPLEMENTARY CONTRIBUTION RATE FOR PENSION INSURANCE OF THE EARLY RETIREES ............................ 32 3.5. TREND IN NUMBER OF EMPLOYEES ENTITLED TO ESP IN MONTENEGRO IN THE PERIOD 2011 – JUNE 2016 ... 34 3.6. CONDITIONS FOR RE-ENTERING OF THE RETIREES TO THE LABOR MARKET .................................................. 45 4. REVIEW OF INTERNATIONAL PRACTICE IN THE AREA OF EARLY RETIREMENT FOR SPECIAL AND HAZARDOUS OCCUPATIONS ....................................................................................................... 48 4.1. TRANSITION TO RETIREMENT IN THE EU COUNTRIES.............................................................................. 52 4.2. EARLY RETIREMENT CHANGES IN EU COUNTRIES................................................................................... 54 4.3. WORK IN SPECIAL CONDITIONS IN SELECTED COUNTRIES: EARLY RETIREMENT AND PREVENTION MECHANISMS. 59 4.4. POLICE AND ARMY FORCES IN THE EU................................................................................................. 65 4.5. POLICIES TOWARDS WAHJ ............................................................................................................... 66 4.6. COUNTRY CASE: POLAND AS AN EXAMPLE OF BEST PRACTICE REFORM OF PENSIONS FOR WAHJ ................... 67 5. CONCLUSIONS AND RECOMMENDATIONS FOR REFORMING EARLY RETIREMENT SYSTEM FOR SPECIAL AND HAZARDOUS OCCUPATIONS IN MONTENEGRO....................................................... 76 REFERENCES ............................................................................................................................... 82 ANNEX 1. MAIN LEGISLATIVE PROVISIONS CONCERNING THE EXTENDED SERVICE PERIOD SYSTEM IN MONTENEGRO: ...................................................................................................................... 84 ANNEX 2: LIST OF CONDITIONS FOR RETIREMENT, GENERALLY REFERRED TO AS “MORE FAVORABLE CONDITIONS” ............................................................................................................................. 85 ANNEX 3. LISTS OF EXCEPTIONS TO REGULAR RETIREMENT AGE .................................................. 86 ANNEX 4. A LIST OF ELIGIBLE OCCUPATIONS AND WORK PLACES ENTITLED TO ACCELERATED SERVICE PERIOD ......................................................................................................................... 88 ANNEX 5. RETIREMENT AGE, SPECIAL SCHEMES, PENALTIES AND BONUSES IN PENSION FORMULA IN THE EU COUNTRIES ...............................................................................................................117 ANNEX 6. EARLY RETIREMENT TREATMENT OF SELECTED JOBS IN 9 EU COUNTRIES.....................131 3 Executive Summary The report presents options for early retirement in special and hazardous conditions in Montenegro. The recent reforms of pension system, including rising of retirement age to 67 are in accordance with European trends, however, reintroduction of early retirement possibilities from 2010 raises concerns regarding the sustainability of the social security system. Reforms aimed at improving efficiency and sustainability of pensions are also recommended by the European Commission. Population ageing in Montenegro accelerates as a result of both declines in fertility and increase in life expectancy. Old-age dependency ratio (number of people aged 65 and more per 100 people in age group 15-64) will rise from 19 in 2010 to 47.1 in 2065. At the same time, only 50% of working-age people in Montenegro has a job, and among those in age group 50 and over this is only 23.6%. The gap in employment rates to the EU countries is large and did not change in the past decade. High cost of labor, related also to social insurance contributions needed to finance early retirement in many occupations with low-hazard, though in the past considered as hazardous ones can be one of the reasons for low employment levels, both in the case of youngest and oldest workers. In recent years, the increase in the number of pensioners is faster than the increase in the number of workers, which means that the system dependency is worsening. Pension contributions finance less than 70% of total expenditures – there was some improvement in this indicator between 2012 and 2014, but it worsened again in 2015. There are various routes to early retirement in Montenegro: for those with long work experience, also for workers who lost job due to bankruptcy (in particular aluminum sector, metal-processing industry, or state- owned companies), mine workers, for workers in hazardous occupations, those in special retirement rules and also those working in the so called „armed services“, which are treated similarly as those in the extended service. In the case of extended service, the retirement age is lowered depending on the type of extended service period (12/14, 12/15, 12/16,12/18 or 12/24). The regular pension contribution rate (20.5%) is increased by a supplementary contribution, ranging from 6% to 28%, depending on the extended service rule. The supplementary contribution rate is not sufficient from an actuarial perspective to finance the extended service. The available data, as provided by the Tax Authority, indicates decreasing number of workers entitled to extended service period and also decreasing number of such workers for whom the social contributions were not paid in time. The data on accrued extended service periods for early retirement is not publicly available, which reduces transparency of the system. Moreover, data on extended service period are not regularly shared among the ministries and agencies responsible for implementing tax and pension policies, which creates uncertainty related to supplementary contribution payments and future expenditures accrued on the basis of these rights. 4 Furthermore, the legal options for re-employment of the first-time pensioners are liberal: they can maintain the right to pensions earned and full wage. Beneficiaries of the survivor pensions are not able to keep their pensions in the case of employment or self-employment (with two exceptions to this rule, one of which refers to widows and widowers). This is another push factor that provides incentives for early retirement. The international policy directions clearly show reforms towards increasing retirement age. These reforms combine measures that are related to improvements of workability of people, through labor market, health care and lifelong learning measures. These include also adoption of workplaces and work conditions to the needs of the ageing workforce. In all EU countries reforms are introduced that increase the legal retirement age. In 17 countries, there are penalties in benefit formula for early retirement. One of the routes to early retirement is the work in the arduous or hazardous conditions. These conditions are frequently defined in relation to factors, which can have long-lasting impact on individual health and cannot be prevented by suitable measures. Poland is one of the examples of effective reforms of early retirement due to hazardous conditions. The reform, introduced in 2009, reduced the scope of early retirement by developing a new list of hazardous workplaces, based on the new definition focusing on the impact on health. This new list replaced the old broad list of occupations eligible for early retirement. The new “bridging” benefit is paid to the narrow group of workers between early retirement age (which is 5 years lower than the regular one) and legal retirement age. The bridging benefits are financed by additional contribution paid by employers and the subsidy from the state budget. The pension measures are combined with labor market reforms supporting longer work. The results of the reform are both sharp decline in early retirement pensioners and increase of employment rate in age group 55-64 years. Based on the international experience, it is recommended that extended service pensions in Montenegro are narrowed to those working in workplaces that include conditions with long- lasting impact on health, such as working under ground, in hot and cold temperatures, forced posture, heavy physical work. This group based on international experience should cover below 2% of the workers (excluding military and police). The conditions for the extended service should be adopted based on the experience of professionals in occupational medicine. Montenegro employs exceptionally high number of military and police personnel. Most of employees, especially in the police (internal affairs), are eligible for extended service period. It is recommended to analyze and review which jobs and positions are hazardous and arduous and revise the list accordingly, primarily in the police. Other routes to early retirement, in particular due to long work service should be removed. The extended service early retirement pension should be financed by actuarially fair separate contribution paid by employees and employers, for a period of early retirement that is no longer than 5 years. The separate contribution should be administered by the current pension 5 administration, which would increase the transparency of funding, as well as improve the quality of data on the coverage of the extended service period. Furthermore, labor market reforms are recommended focusing on adjusting work conditions to the needs of older workers, re-training and improvements of work flexibility and work. Options of early retirement for long service periods should be revisited. The public information campaign accompanying the reforms should aim at raising social awareness on the need for such reforms. 6 Introduction The aim of this report is to present options for reforming early retirement system in Montenegro. The pension system in Montenegro went through a series of rationalizing reforms in the past two decades (Golubović, 2008; World Bank, 2015). The most important changes include rising retirement age to 67, introducing point formula and widening earnings period taken into account for calculating of the pension. At the same time, however, the early retirement options were reintroduced in 2010, which contributed to high level of pension expenditure (11% of GDP), low system dependency ratio and high current deficit in the pension system. The early retirement in Montenegro is possible through several channels including retirement for long service period (40 years for men and gradually rising to 40 years for women) as well as early retirement possible from age 62. Furthermore, workers in many occupations considered hazardous are eligible for early retirement with extended services period at low additional cost, which does not cover the expenditure related to the payment of these pensions. The list of occupations is broad, including numerous occupations in various sectors (for example flight attendants, truck drivers, bus drivers, ballet dancers, opera singers) (World Bank, 2015). The social security system in Montenegro is imbalanced and its deficit is rising. The system dependency ratio1 in 2015 was equal to 64, which is relatively high compared to the international standards. The number of new pensioners who at the time of retirement were below age 65 increased by 26.6 thousand over 2010-2015 period, i.e. on annual level this category accounted in average for 5.1% of the total number of pensioners in the observed period. Contribution revenue covers less than 68 per cent of expenditure for pension and retirement benefits (as of 2015). The current system solutions are also not in line with EU-supported and agreed labor market and pension policies towards activation of older workers, longer stay in the labor market and raising the overall labor participation rate. The employment rate of older workers in Montenegro is one of the lowest, comparing to the EU countries. Therefore, there is a need for reforms that would stimulate longer activity in the labor market, while respecting a need for and establishing adequate system for selected hazardous occupations where the need of early retirement is sufficiently proven by evidence. Such reform direction is desired from both national and European perspectives. Given the on-going EU accession negotiations, it is also worth putting the challenges ahead of the pension system in Montenegro in the European context. The European Commission’s White Paper. An Agenda for Adequate, Safe and Sustainable Pensions (European Commission, 1 Measuring the number of pensioners per 100 of insured people. 7 2012) sets forth a series of challenges for Member States’ pension systems in the light of population ageing. These include: securing financial sustainability of pension systems, maintaining adequacy of pension benefits and raising the labor market participation of women and older workers. The 2015 Annual Growth Survey (European Commission, 2015) recognizes efforts made by the member states to reform their pension systems but at the same time calls for further reforms that are necessary to increase the efficiency and financial sustainability of pensions. The reforms should aim at preserving the adequacy of pension systems, so that a decent level of income after retirement is ensured. Given the trend of increasing longevity, in many countries a more dynamic view on the age at which people can retire needs to be established, including linking statutory retirement ages to life expectancy more systematically to ensure an adequate balance between life spent working and spent in retirement. These challenges are also adequate to the Montenegrin pension system. (European Commission, 2008) in its assessment of the social protection and social inclusion in Montenegro pointed out that the main goals should be the creation of an institutional framework that will encourage people to work longer and more productively. The government must also keep in mind that objectives should be oriented towards raising employment rates to overcome some of the troubling existing trends. The main objectives are related to making the pension system more sustainable through sound public finances, or by balancing benefits and contributions. Thus, the reform of the early retirement system, including solutions for hazardous occupations in Montenegro is a challenging, but necessary task. In the report, we present the potential options for the reform directions aiming at introducing solutions that would help to regain the system sustainability and promote longer working lives. The recommendations are supported by the evaluation using the example of Poland (as a good practice example from the Central and Eastern Europe region) as well as economic analysis of the available information from the Montenegrin social insurance system. The analysis is based on the available data related to hazardous occupations and early retirement pensions in Montenegro. It should be underlined that the availability of data related to this part of early retirement system is limited. There are also many inconsistencies in the data, which indicates low reliability of information possessed by the social security administration. Any further work and developments in this area should also include improvement of the availability and quality of data related to early retirement and hazardous occupations in Montenegro. The report is structured as follows. In the first section, we refer to the demographic and labor market context in Montenegro, which indicate the risks and challenges ahead of the pension system in Montenegro. We also discuss some of the myths that are related to the perception of older workers’ on the labor market. In the second section, we present the current situation of the pension system in Montenegro in general terms. The third section focuses on the 8 analysis of the available information on the current and future prospects of the early retirement scheme. In section four we present recent developments in the EU and OECD countries related to early retirement solutions, including the developments on early retirement for hazardous and arduous conditions. Special attention is put on the description of the 2008 reform of early retirement of hazardous and arduous conditions in Poland and its outcomes. The Polish approach could be used as a model solution in the approach to limit the list of extended service occupations. In section five we present recommendations for the reform of policies related to the extended service period pensions as well as general early retirement policy in Montenegro. 1. Demographic and labor market context In this section, we present a short overview of the demographic and labor market developments in Montenegro. Demographic trends, particularly those related to the population ageing and rising share of people above retirement age, affect the current and future situation of the pension system. However, it is also under influence of the labor market situation; low employment rates transfer to the lower contribution revenue and higher social security system deficits, thus additionally worsening the situation of the pension system. 1.1. Demographic developments Population in Montenegro is ageing relatively fast. This phenomenon, which Montenegro shares with many of the post-transition economies, is caused by increases of life expectancy on the one hand and sharply falling fertility rates on the other. Results of the 2011 population census revealed a relatively high increase of the average age of the population of 37 years (increase by 1.1 years compared to a decade before). UN population projections indicate that over the next few decades Montenegrin population will age significantly; the size of the population in age group 65 and over will increase significantly. Its share in the total population is expected to almost double by 2065 compared to 2015 (Figures 1 and 2). By the same token, population in age group 15-64 years will decline in size (by almost 27%) and its share (around 9.5%) it total population that is projected to decrease by almost 15%. Old-age dependency ratio (people aged 65 and more per 100 people in age group 15-64) will more than double, from 19 in 2010 to 47.1 in 2065. 9 Figure 1: Projection of the Population Size by Age Groups in Figure 2: Projection of the Age Groups' Share in Total Population of Montenegro (in 000) Montenegro (in %) 450 120.0 400 100.0 350 13.6 16.0 17.7 19.4 20.3 21.3 22.5 24.1 25.0 26.2 27.4 300 80.0 250 60.0 200 67.7 66.3 65.6 64.6 64.0 63.3 62.4 61.0 60.3 59.3 58.2 150 40.0 100 20.0 50 18.7 17.7 16.7 16.1 15.7 15.4 15.2 14.9 14.6 14.5 14.4 0.0 0 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 0 - 14 15 - 64 65+ 0 - 14 15 - 64 65+ Source: UN Projection of Population (2016) 1.2. Labor market situation in Montenegro Employment rate in Montenegro in 2015 was lowest than any of the EU countries except for Greece. Only 51.4% of the population aged 15-64 had a job in 2015 while employment rate for the older population (aged 50 years or more) stood at only 23.6%, which is also one of the lowest compared to the EU countries (Figure 3). Figure 3: Employment rates in Montenegro and EU in 2015 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 European Union (27… Estonia Austria Sweden Latvia France Portugal Montenegro Poland Luxembourg Malta Finland Spain Romania Hungary Denmark Netherlands Croatia Ireland Greece Italy Slovakia Cyprus Bulgaria Slovenia Belgium Lithuania Czech Republic United Kingdom Germany 15-64 50+ Source: Montenegrin Bureau of Statistics (Monstat) and Eurostat Moreover, comparison of the developments of the employment rate of people in working age with those aged 55 to 64 (Figure 4) shows a persistent widening gap between employment rate in Montenegro and EU 27, rising especially from 2008, after the outbreak of the economic crisis, and particularly for men. 10 Employment of the working age population shows some signs of improvement as of 2013, however development in that year was less of a result of increased economic activities and more of statistics. Namely, adoption of the Law on the Prevention of Illegal Activities end June 2013 resulted in an increased reporting by the employers to the Tax Authorities (and consequently to Monstat) of the employed persons who prior to that worked unregistered for these employers. Employment of the population aged 55 to 64 (particularly men) started to decrease in 2010 after the introduction of a general early retirement at 62 with 15 years of service 2, which did not exist previously. In addition to that, early retirement for special categories (police and military that retire with 50 years of age and 20 years of service) was extended for miners who can now retire with 30 years of service (of which 20 in jobs with extended service calculation). Decline in employment of the population aged 55 to 64 as of 2013 is further explained by granting of the same opportunity to also workers in the aluminum industry in 2013 and in the metal-processing industry in 2014. Extension of an early retirement in both cases was a part of the re-privatization process of the bauxite mine and aluminum industry. All these economy sectors (police, mines, aluminum industry) were male-dominated, which partially explains drop in number of employed male aged 55 to 64. General trend of decreasing deployment of this age group for both genders is expected to continue, as in 2015 the new possibility for early retirement was granted to men (after 30 years of service) and woman (after 25 years of service) working in the by the state co-owned companies that went bankrupt. Figure 4: Employment rates in Montenegro and selected EU3 countries by age and gender, 2005-2015 Men 15 -64 Women 15 - 64 80.0 100.0 80.0 70.0 60.0 60.0 40.0 50.0 20.0 40.0 0.0 30.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20.0 Sweden 10.0 European Union (27 countries) 0.0 Poland 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Montenegro Sweden European Union (27 countries) Poland Montenegro 2 It was done to smooth the impact of increasing the retirement age to 67 (introduced in 2010) and of eliminating privileged retirement rules for hazardous occupations (introduced in 2012 and 2013) by the amendments to the Law on Pension and Disability Insurance („Official Gazette of Montenegro, No. 54/03,61/04, 81/04, 81/04, 14/07, 47/07, 79/08, 14/10, 78/10, 34/11, 66/12, 38/13, 61/13, 6/14, 60/14-I, 60/14-II, 10/15). 3 In the tables, EU is represented with EU27 indicators with the aim of better comparison between Montenegro and EU countries as EU28 indicators include Croatia which joined EU only as of July 1, 2013. 11 Men 55 - 64 Women 55 - 64 90.0 80.0 80.0 70.0 70.0 60.0 60.0 50.0 50.0 40.0 40.0 30.0 30.0 20.0 20.0 10.0 10.0 0.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sweden European Union (27 countries) Poland Montenegro Sweden European Union (27 countries) Poland Montenegro Source: Montenegrin Bureau of Statistics (Monstat) and Eurostat As shown in the World Bank’s Labor Markets Technical notes (2011 and 2012, with revisions under preparation), and World Bank (2015) labor market outcomes are highly unsatisfactory in Montenegro. Employment rate and labor force participation are low, while the exit age from the labor market is significantly lower than in other developing countries. The costs of low labor participation and early exit are high system dependency ratio of 1.6 insured per pensioner, more than 10% of GDP spent on pensions, and high overall social insurance contributions required to finance social protection, which are close to 35% of wages, of which 20 p.p. is devoted to pensions. The tax wedge in Montenegro is higher compared to other countries in the region. It is worth comparing developments in Montenegro and Poland4; the latter had quite higher employment rate of the population group aged 15 to 64 compared to Montenegro in 2005 and has managed to maintain it even after 2008. In the case of population in age group 55-64, the situation in Montenegro and Poland was similar in 2005. Afterwards, Poland managed to steadily increase employment rates of the population aged 55 to 64. Employment rates in this category have increased by 18.3 p.p. for men and 15.8 p.p. for women between 2005 and 2014 (as discussed below, this is an outcome, among others, of the early retirement reform), which is faster than for any other age group. Overall low employment rate for the population aged 50 years and more is linked with the high inactivity of this population (Figure 5); only 36% of the population older than 50 years was active (either employed or unemployed) on the labor market in Montenegro in 2015. 4 Poland is the EU country that in 2005 had employment rates for the population aged 55-64 closest to Montenegro and introduced reforms that led to the increase of this level after 2008. 12 Figure 5: Activity and inactivity rates for older (50+) population in Montenegro and EU in 2015 120.0 100.0 80.0 55.1 64.1 72.5 60.0 40.0 20.0 44.9 35.9 27.5 0.0 Romania Austria Italy Greece Croatia France Spain Bulgaria Cyprus Estonia Portugal Slovakia Finland Denmark EU28 Czech Republic Latvia Lithuania Ireland Netherlands Sweden Belgium Malta Slovenia Hungary Luxembourg Poland Montenegro United Kingdom Germany Activity Rate (50+) Inactivity Rate (50+) Source: Monstat and own author’s calculation for Montenegro and Eurostat for EU countries This is somewhat lower than the average activity rate for population aged 50 years and more for the EU as a whole that was 37.0% while the highest one was recorded in Sweden (44.9%) and lowest in Greece (27.5%). Rather low level of activity among this population group in Montenegro is reflected also in the explanation of the main reasons for inactivity of the age group 15 and older, which was retirement. In 2012, according to LFS conducted by Monstat, the main reason for inactivity within this group was retirement with 38.6% vs. 20% in EU 5 (it was followed by education with 25.9% vs. 32.4% in EU and by other personal and family responsibilities with 14.7% vs. 4.7% in EU). In 2015, percentage share of the inactive people in the age group 15 years and older who are inactive due to retirement increased to 40.8% while the active population size increased by 1.9%. These data indicate that there is a high number of retired people in Montenegro, who are below the legal retirement age. Montenegrin population has also shorter average working life. Duration of the working life for EU as a whole was 35.4 years in 2014, while in Montenegro, the average period of paying pension contributions (indicator closest to the definition of the working life), for the category of old-age pensions, which excludes invalidity pensions and family pensions, was only 33 years and three months in 2015. Labor market policies need to take the active aging perspective. However, frequently these policies are driven by the necessity to increase the employment rate of younger workers. The policy makers frequently fall into the so-called “lump of labor” fallacy, which is that the improvement of employment among the young population can be achieved by reduction of employment among older workers. Also, myths of older workers are influencing these policies 5 European Union Labour Force Survey 2012. 13 and resulting in low employment rates of older workers. Those in ages 50 and over are perceived as less healthy and less productive. This fallacy has been repeatedly questioned by researchers. (Börsch-Supan, 2012), among others, provides scientific evidence that counteracts these myths in the long-term horizon. Evidence from Montenegro shows little substitution between the young and the old on the labor market since 2008. As indicated in Figure 6, increasing employment rate of older workers is accompanied by falling employment rate of younger workers. This development should be observed through the lenses of the economic developments since 2008 and the government measures. A decrease of employment rates of younger people is probably a result of contraction of the new employments due to the economic crisis. Concomitantly, employment rates of older workers continued to steadily increase (mainly for women and less for men, as indicated in Figure 4) as a reflection of employment structure by the sectors of the economy. Namely, almost 27% and over 7.5% of employees have worked in the public companies in 2015 (down from 30% and 9%, respectively), i.e. in mining and manufacturing, where older workers make relatively large portion of employees.6 The increase of employment rates of the older population can also be a result of the Government’s policy measures introduced in 20097. If we look at the relation between employment rates of young and older workers, we see that there is statistically negative, but not very significant correlation of the two measures in time. This is clearly seen in Figure 7, which indicates a little relation between analyzed employment rates. Figure 6: Employment rate of people aged 15- 24 and 55-64 in Figure 7: Relation between employment rate of people aged 15-24 Montenegro, 2005-2015 and 55-64 in Montenegro (moving averages), 2005-2015 45.0 41.0 40.0 39.0 35.0 37.0 30.0 35.0 25.0 20.0 33.0 15.0 31.0 y = -0.3235x + 40.831 10.0 R² = 0.072 29.0 5.0 0.0 27.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 15-24 25.0 15-24 (moving average) 10.0 12.0 14.0 16.0 18.0 20.0 22.0 55-64 55-64 (moving average) employment rate 15-24 Series2 Linear (Series2) Source: Monstat and own calculations Source: Own calculations 6 Privatization processes in mining and manufacturing industries as of 2011 motivated legaly enabled and factual early retirement of mainly the male older employees, which explains slower employment growth of older males as presented in Figure 4. 7 The measures refer to the signing of the Memorandum on Social Partnership in the Circumstances of the Global Economic Crisis between the Government (Ministry of Health, Labour and Social Welfare), Federation of Trade Unions of Montenegro and Associations of Employers of Montenegro. The memorandum was particularly aimed at protecting the socially vulnerable categories of citizens, but also at maintaining of macroeconomic stability, continuing reforms on the road to EU, and preservation of competitiveness of the economy. 14 There is a hidden cost of the early retirement that is paid by the labor market that should be recognized. The use of early retirement reduces the size of active labor force participants. As a result, pension expenditure is higher and contribution revenue is lower. This frequently leads to the increases of tax wedge and further pressure to reduce labor market demand. Reforms of early retirement scheme contribute not only to the improvement of the pension system, but also improve labor market performance for younger generations. Reducing the opportunities for early retirement will not lead to worsening the labor market situation of the younger people. The increase of their employment (but also preserving of employment of the older employees) will depend more on the reduction of the level of taxes levied on wages8 and on overall economic growth. 2. Pension system situation Demographic trends and labor market situation affect the pension system. Low average duration of the working life and low employment (and activity rates) contribute to the negative situation in the pension system. While Montenegrin population is aging, the number of insured people has been constantly growing (except for the 2009 contraction due to the economic crisis). However, legally created opportunities on one hand and pressures from the real economy for early retirement (due to the privatization processes and to them related bankruptcies) on the other hand reflect concomitantly to the increase of the number of pensioners. As the growth of the latter group is faster, this leads to the increase of the system dependency ratio and high costs of social security contributions and taxes, which affect the labor market. This vicious circle needs to be reversed both for the improvements on the labor market and pension system. The current situation of the pension system reflects, on one hand, economic developments after the outbreak of the global economic crisis in August 2008, but also the legislation and early retirement provisions created as of 2010 (Figure 8). By the end of 2009, the average number of insured persons was increasing at the rates higher than the average number of pensioners, due to the economic growth and smooth adjustments to the economic crunch (Figure 9). However, due to the latter, as of 2010 a number of opportunities were created, general and exceptional, to take on retirement age legally increased in that year (67 for both men and woman) and retire early. That resulted in a stronger growth of the number of pensioners compared to the number of insured persons (2.5% vs. 0.2%, respectively). Due to 8 Currently, the rates of such taxes are not high, but the way of their application to the salary base results in the overal tax burden that is almost double to the original tax rate. This feature causes evasion of pension (and other) contribution payments of the current workers, urges employers to support early retirement and demotivates new employments. 15 the expiry of the time-limited exceptional options for early retirement, a growth of the number of pensioners took a slower pace as of 2013. Concomitantly, in that year the number of insured persons increased, among other, for the statistical reasons explained earlier. Figure 8: Number of insured individuals and of pensioners, 2003 – Figure 9: Increase rates of average numbers of insured individuals and 2015 of pensioners, 2004 - 2015 200,000 7.0 6.3 180,000 6.0 4.8 5.0 4.5 4.3 160,000 Increase 3.7 4.0 3.4 rates of 140,000 2.9 3.0 2.8 average 3.0 2.2 2.1 number of 120,000 2.0 1.4 1.6 1.6 insured 1.2 1.2 1.4 1.2 0.6 0.6 0.6 0.8 individuals 1.0 0.3 100,000 0.0 80,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -1.0 Increase 60,000 -2.0 rate of -3.0 average 40,000 number of -4.0 pensioners 20,000 -5.0 0 -6.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -7.0 Insured individuals (annual average) Pensioners (annual average) -8.0 -7.1 Source: PIO Fund Source: PIO Fund Table 1 shows a development of the number of insured individuals as of 2003 when the first round of the pension reform was performed. It introduced increasing of the statutory age to 65/60 for men/women but did not offer the general early retirement option. Along with the increase of economic activities, these reform features contributed to the decrease of the dependency ratio (Figure 10). The second round of the pension reform, executed through the adoption of the new Law on Pension and Disability Insurance in 2010, which enabled early retirement under general and exceptional conditions, resulted (along with slow economic recovery) in the increase of the dependency rate. The rise in the dependency rate flattened in 2014 but picked up again in 2015 due to the reasons described earlier. Obviously, an inflow of the early pensioners has made an impact to the growth of a total number of pensioners exceeding 100 thousand and continuing to grow further, as expected. 16 Table 1: Number of insured individuals and of pensioners, 2003 - Figure 10: System Dependency Ratio, 2003 - 2015 2015 Insured Pensioners 66 individuals (annual average) 64 (annual average) 2003 142,679 88,845 62 2004 143,479 90,079 2005 144,340 91,542 60 2006 150,800 92,057 2007 156,408 95,210 58 2008 166,221 95,515 56 2009 174,152 97,088 2010 161,742 99,196 54 2011 163,082 103,439 2012 166,531 106,477 52 2013 171,474 107,799 2014 173,595 109,275 50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2015 175,617 112,362 Source: PIO Fund Source: PIO Fund The inflow of new pensioners as of 2010, and especially since 2011 was fairly large, mainly as a result of early retirement possibility. PIO fund data on the number of new pensioners shows that in 2010, 2011, 2013, and 2015, the largest inflow of pensioners was in relatively young age groups: between 51 and 62 years of age, as well as noticeable share of those retiring between ages 45 and 50 years (Figure 11). The option for early retirement is created also through a transition period in which the conditions for old-age retirement can be fulfilled, with the number of years of age lesser than the statutory (67 years of age), i.e. 60 (with 15 years of service for men and women), and 55 for women with 35 years of service. These opportunities have significantly affected the inflow of new pensioners aged between 51 and 62 years. Looking at the number of beneficiaries of the pensions acquired under more favorable terms (data exclude the accelerated retirement), the share of those who were retired on the basis of fulfilling the conditions of 62 years of age and 15 years of service continuously grew by September 2016 compared to other options9 (from 27.2% in 2011 to 43.5% in 2014), when it amounted to 40.7%(Figure 12). Influx of the new beneficiaries was especially high in 2015, mainly owing to those among them for whose retirement conditions were legally enabled in December 2014 and time-limited to only a few months of 2015 (this category amounted to 70% of the total annual influx).10 9 Other options are described in detail in the section 3.2.Early retirement and include temporary and exceptional optiond for early retirement. 10 Workers of the companies co-owned by the state, whose employment was terminated due to the bankruptcy (30 years of service for men and 25 for woman), and the workers of the metal-processing industry whose employment was terminated due to the bankruptcy and who in this process have not received severance pay (30 years of service), regardless of the years of age. 17 Figure 11: Number of new pensioners, total and per age cohorts (LH Figure 12: Compounded number of pensioners who retired based scale) and total number of pensioners (RH scale) on the specific conditions for early retirement (excluding accelerated service period) 9,000 115,000 12,000 8,000 10,000 110,000 7,000 6,000 8,000 105,000 5,000 6,000 4,000 100,000 3,000 4,000 2,000 95,000 2,000 1,000 0 90,000 0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 I -IX 2016 45-50 51-62 Number of beneficiaries who retired based on the specific conditions for early retirement (excluding accelerated service period) 63-67 68-75 Number of beneficiaries who retired early based on 62 years of age and 15 Number of new pensioners Total number of pensionairs years of service Source: PIO Fund Source: PIO Fund Given the rise in the number of beneficiaries, the pension system in Montenegro is not self- sufficient. The revenues from collected contributions are not enough to cover of expenses of the pension benefits. Table 3 shows that the ratio of revenues from contributions and expenditures for pensions and retirement benefits was increasing by the outbreak of the crisis and by the end of 2008 it amounted to 76.7%. However, in 2009 it contracted significantly to 56.1%. The ratio recovered in 2010 but continued to decrease in 2011 and 2012, due to a strong increase in expenses for the pension benefits (by 7.8% and 6.2% on annual basis, respectively). It recovered in 2013 to 63.1% due to a significant increase in revenues from contributions (by 11.8%), which was mainly a result of the efforts to legalize the grey economy. The ratio continued to increase in 2014 (to 70.3%), but it decreased in 2015 (to 68.7%). Consequently, the share of the PIO Fund expenditures for pensions and retirement benefits in GDP increased in 2009 and again in 2011 and 2012, but in 2013 it started to decrease, due to the stronger growth of GDP (which was partially a result of the fight against the grey economy). The share of the PIO Fund’s revenues in GDP declined in 2009 and in 2011, but then it started and continued to rise (in 2012 as a consequence of the GDP contraction) until 2015 when it dropped again. The deficit (expressed as pension expenditures minus contribution revenues) reached 5.1% in 2012, resulting in rising of the share of the revenues from the (state) budget in total PIO Fund revenues to 42.8%. In 2015 both figures declined to 3.3% and 32.0%, respectively. Increase of expenditures for pensions and retirement benefits was in the large extent a result of growth of pensions paid on the basis of early retirement (Table 2). The largest increase in the PIO Fund expenditures for pensions and retirement benefits was recorded in 2011-2012, following the adoption of amendments to the Law on Pension and Disability Insurance (the Law). These amendments enabled various forms of early retirement, which were further altered through the changes to this Law during the entire observation period (to support the 18 processes of privatization of the state-owned companies), as explained below. Consequently, pensions that were paid on the basis of early retirement participated in the annual growth of total expenditures for pensions and retirement benefits of the PIO Fund with 30% in 2011 and 83% in 2012. However, since 2012, the one-time effect of the time-limited conditions for early retirement on the level of pensions paid on the basis of early retirement was becoming smaller. By 2015 this figure was becoming more influenced by the pensions paid to those who decide to retire with 62 years of age and 15 years of service, as enabled through Art. 17a of the Law. In that year influence of the pension beneficiaries who retired under more favorable conditions other than those whore retired under Article 17a and pensions paid to them to the expenditures of the PIO fund becomes more pronounced. Not only that the annual inflow of pension beneficiaries who retired based on Article 17a decreased in 2015 compared to the rest of beneficiaries who retired under more favorable conditions; the pensions paid to the later amounted to 66% of the annual increase of the pension expenditures paid to the beneficiaries who were entitled to the early retirement. Table 2: Share of the pensions paid on the basis of early retirement in the total PIO Fund expenditures 2010 2011 2012 2013 2014 2015 PIO Fund expenditures for pensions and retirement benefits 1 (Mill. Euro) 331.0 356.9 379.0 383.2 384.4 387.0 Total pensions paid out to beneficiaries who were entitled to 2 early retirement (Mill. Euro), of which: 1.4 7.7 18.4 22.8 26.4 30.77 - pensions accuired under Article 17a, in Mill. Euro (early 3 retirement based on 62 years of age and 15 years of service) 1.1 3.6 5.4 7.2 8.68 Memorandum items: Share of total pensions paid out to beneficiaries who were entitled to early retirement in PIO Fund expenditures for pension 4 and retirement benefits, in % (row 2/1) 0.43 2.16 4.85 5.94 6.86 7.95 Share of priviledged pensions accuired under Article 17a in the total pensions paid out to beneficiaries who accuired them under 5 more favorable conditions, in % (row 3/2) 14.9 19.6 23.7 27.2 28.2 Number of pension beneficiaries who were retired based on 6 Article 17a 846 1,677 2,501 3,354 4,055 Annual inflow of pension beneficiaries who retired based on 7 Article 17a 1,063 791 815 805 748 Number of pension beneficiaries who retired under more 555 2,267 3,590 4,311 4,351 6,485 favorable conditions* (excluding under Article 17a) Source: PIO Fund *More favorable conditions refer to a wide spectrum of conditions that enable retirement prior to old-age legal requirements, explained further in the document under chapter 3.2. Early Retirement. 19 Table 3: PAYG system revenues and expenditures, 2003 – 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Ratio of revenues from contributions and expenditures for pensions and retirement benefits 68.7 71.9 69.0 73.9 75.2 76.7 56.1 70.7 59.8 57.1 63.1 70.3 68.7 PIO Fund expenditures for pensions and retirement benefits as a share of GDP 10.2 9.7 9.4 8.8 8.6 9.1 11.9 10.7 11.0 11.9 11.4 11.1 10.7 Share of revenues from contributions in GDP 7.0 6.9 6.5 6.5 6.5 7.0 6.7 7.5 6.6 6.8 7.2 7.8 7.3 Share of revenues from the (state) budget in total PIO Fund revenues 23.2 22.5 23.4 26.4 24.4 23.7 37.0 29.7 40.2 42.8 37.2 30.3 32.0 Deficit (pension expenditures - contribution revenues) as % of GDP 3.2 2.7 2.9 2.3 2.1 2.1 5.2 3.1 4.4 5.1 4.2 3.3 3.3 Memorandum items PIO Fund revenues from Contributions (Mill. Euro) 105.9 116.0 118.3 139.3 173.9 214.6 199.5 234.1 213.5 216.5 242.0 270.3 265.91 PIO Fund expenditures for pensions and retirement benefits (Mill. Euro) 154.1 161.3 171.4 188.6 231.4 279.9 355.7 331.0 356.9 379.0 383.2 384.4 387.04 PIO Fund revenues from the (state) budget 38.6 37.7 44.2 54.3 61.2 68.4 122.1 99.9 145.4 164.1 144.0 117.8 125.56 Total PIO Fund Revenues (Mill. Euro) 166.2 167.9 189.0 205.7 250.3 288.4 329.5 336.2 361.2 383.2 387.6 389.2 392.33 Deficit (pension expenditures - contribution revenues) 48.2 45.3 53.1 49.3 57.5 65.3 156.2 96.8 143.4 162.5 141.2 114.1 121.13 GDP in Mill. Euro 1510.1 1669.8 1815.0 2149.0 2680.5 3085.6 2981.0 3103.9 3234.1 3181.5 3362.5 3457.9 3624.7 Source: PIO Fund and the State Statistical Office-Monstat 20 3. Early retirement in Montenegro In this section, we present the legal and statistical analysis of the early retirement system in Montenegro as well as the assessment of the impact of early retirement on the performance of the pension system. 3.1. Old-age pensions One of the crucial measures of a comprehensive pension reform launched in 2003 in Montenegro was rising the statutory retirement age to 65/60 for men/women. The aim of this measure was to contribute to a later exit from the labor market and to support the sustainability of the PAYG system in a middle to long term. Within this reform Montenegro managed to avoid introduction of the general early retirement option, however, it was eventually introduced during the second round of the pension system reform in 2010. At that occasion, early retirement was introduced with a view to compensating for rising statutory retirement age (to 67 for both women and men) and smooth its impact. The Law on Pension and Disability Insurance (the Law)11, the main legislation regulating pension system in Montenegro, proscribes as of 2010 the three criterions for eligibility for the old-age retirement, the first one being the age of 67 and minimum 15 years of service (Article 17, Paragraph 1)12. The transition period was set to the period 2010 – 2040, during which men should gradually reach retirement age by 2025, and women by 2041 (Figure 13 and Table 1 in Annex 3). According to the second criterion for the old-age retirement (Article 17, Paragraph 2), as of 2010 both men and women have been entitled to an old-age pension when they reach 40 years of service (previously it was 35 years for women) regardless of the years of age 11 „Official Gazette of Republic of Montenegro“, No. 54/2003, 39/2004, 79/2004, 81/2004, 47/2007, and „Official Gazette of Montenegro“, No. 79/2008, 14/2010, 78/2010, 34/2011, 66/2012, 38/2013, 61/2013, 6/2014, 60/2014-I, 60/2014-II and 10/2015. Some changes to the Law were made by the Constitutional Court of Montenegro and through the adoption of the Law on unified registration and reporting system on the calculation and collection of taxes and contributions („Official Gazette of Republic of Montenegro“, No. 29/05). 12 The Law on Changes and Amendments to the Law on Pension and Disability Insurance, „Official Gazette o f Montenegro“, No. 78/10. 21 (previously the minimum age was 5513). Transition period applies for this criterion too; as of 2013 women are entitled to an old-age retirement as of the age 55 and 34 years of service, which both increase by 3 months each year until 2033 when the years of service limit for old- age retirement should reach 40 years as presented in Figure 14 and in Table 4 (Article 198a)14. For workers with 40 years of service an additional benefit was introduced if they were applying for the first time for an old-age pension; when determining the number of personal points by application of the stipulations of the Article 21 of the Law,15 the insurance period over 40 years would be increased by 40% (Article 202a).16 Later on, as of 2013, the second criterion was modulated at the three occasion for the three type of workers with a view to accommodate better conditions for the workers of the bankrupted companies and to help the owners more easily curb the labor costs.17 In August 2013, notwithstanding Article 17, workers whose employment in the aluminum industry was terminated due to the bankruptcy were entitled to an old-age pension if they had attained 30 years of service, regardless of the years of age (Article 197j).18 The right to an old age pension in accordance with this Article could have been exercised until September 30, 2013. Later on, in December 2014, the right to retire under the same conditions was given to the workers of the metal-processing industry whose employment was terminated due to the bankruptcy and who in this process have not received severance pay (Article 197k).19 The right to an old age pension in accordance with this Article could have been exercised until March 15, 2015. Finally, in February 2015 the similar right to retire after 30 years of service for men and 25 years of service for woman (and regardless of the years of age) was given to the workers of companies co-owned by the state, whose employment was terminated due to the bankruptcy. The right to an old age pension in accordance with this Article could have been exercised until July 15, 2015.20 13 As of 2004 women were entitled to an old-age retirement as of 35 years of service and 50 years and 6 months years of age, where the latter increased by 6 months each year until 2013 when the age limit for old-age retirement had to reach 55 years (Article 198). 14 The Law on Changes and Amendments to the Law on Pension and Disability Insurance, („Official Gazette of Montenegro“, No. 78/10). 15 Article 21 stipulates that personal points of the insured person shall be determined by multiplying his/her personal coefficient and years of service. 16 Ibid. 17 These three cases referred to the workers of the companies who went through repeated privatization processes and/or were co-owned by the state. 18 Article 1 of The Law on Amendments to the Law on Pension and Disability Insurance, („Official Gazette of Montenegro“, No. 38/13). 19 Article 2 of The Law on Amendments to the Law on Pension and Disability Insurance, („Official Gazette of Montenegro“, No. 60/14). 20 Article 1 of The Law on Amendments to the Law on Pension and Disability Insurance („Official Gazette of Montenegro“, No. 10/15). 22 The third criterion for the old-age retirement introduced within the 2010 pension reform referred to the mine workers who became entitled to retirement when they reached 30 years of service, of which at least 20 years effectively spent on workplaces in the mines where years of service shall be calculated at an accelerated rate (Article 17, Paragraph 3)21. However, beginning July 201122 possibility to retire after 30 years of service was given also to the persons who have spent 20 years working on the workplaces, i.e. jobs that are eligible for accelerated service period (Article 197z). The latter option expired by December 31, 2011. At the same occasion, the right to retire after 20 years of service, regardless of the years of age was given to the one of the parents who has a child or is a caretaker of the child with severe difficulties in development that is a user of the personal invalidity benefits, regardless of the child’s age . In addition, the level of the pension of such parents, i.e. caretakers, is increased by 20% to the level calculated by the Law. This stipulation is still valid. In exception to the PDI Law, amendments to the two other laws enabled old-age retirement under favorable conditions for the two groups of employees of the Agency for National Security and of one group of employees of the Ministry of Interior, i.e. police. Namely, the Law on Amendments to the Law on Agency for National Security23 introduced two options for employees of this Agency; first option (Article 52b) introduced termination of employment by May 1, 2015 for the employees who by April 30, 2015 turned 50 years of age and 25 years of service, of which at least 15 years effectively spent on jobs with accelerated service period 2015. The right to an old age pension in accordance with this Article could have been exercised from March 7, 2015 to July 1, 2015. The second option was created for the employees of this Agency who terminated employment at their personal request by May 1, 2015 if, by April 30, 2015 the employee turned 50 years of age and 20 years of service, of which at least 10 years effectively spent on jobs with accelerated service period. The right to an old age pension in accordance with this Article could have been exercised from March 7, 2015 to July 1, 2015. Amendments to the Law on Internal Affairs24, enabled opportunity for an old-age retirement for the employees of the Ministry of Internal Affairs, i.e. of police, who terminated employment at their own request by April 1, 2015 if, by January 31, 2015 they turned 40 years of age and 20 years of service, of which at least 10 years effectively spent on jobs with ESP. The right to an old age pension in accordance with this Article could have been exercised from January 13, 2015 to July 1, 2015. 21 Article 1 of The Law on Amendments to the Law on Pension and Disalbility Insurance ( „Official Gazette of Montenegro“, No. 14/10). 22 The Law on Amendments to the Law on Pension and Disability Insurance, („Official Gazette of Montenegro“, No. 34/11) 23 „Official Gazette of Montenegro“, No. 28/05, 86/09, 20/11 and 8/15. 24 The Law on Changes and Amendments to the Law on Internal Affiairs, „Official Gazette of Montenegro“, No. 1/15. 23 Influence on the increase of the number of pensioners in Montenegro made by the opportunities for the old-age retirement created by the PDI Law (and lesser so by the Law on Amendments to the Law on Agency for National Security) including through the beginning of the rather generous transition period as of 2010, was the most exaggerated in 2011 (Table 4). However, opportunities created through the Amendments to the Law on Internal Affairs contributed to the stronger inflow of the old-age pensioners in 2015. Table 4: Number of total and of old-age pensioners in the period 2010 - 2015 2010 2011 2012 2013 2014 2015 Total number of pensioners in Montenegro, of which: 99,196 103,439 106,477 108,689 109,670 112,362 - old-age pensioners 46,889 51,204 54,229 56,658 58,027 61,037 Inflow of old-age pensioners 4,384 7,119 3,607 3,918 3,257 5,668 Annual inflow Total number of pensioners in Montenegro, of which: 4,243 3,038 2,212 981 2,692 - old-age pensioners 4,315 3,025 2,429 1,369 3,010 Inflow of old-age pensioners 2,735 -3,512 311 -661 2,411 Shares Share of old pensioners in total number of pensioners 47.3 49.5 50.9 52.1 52.9 54.3 Share of inflow of old pensioers in total number of pensioners 4.4 6.9 3.4 3.6 3.0 5.0 Share of inflow of old pensioers in total number of old pensioners 9.3 13.9 6.7 6.9 5.6 9.3 Source: PIO Fund 3.2. Early retirement In addition to regulating the old-age retirement, the Law also proscribes general conditions for early retirement; the right to an early retirement within the PAYG system an insured person has when she/he turns 62 years of age and 15 years of service (Article 17a25). However, women shall become entitled to early retirement related to the years of age only as of January 1, 2022 (Article 197e). The 2010 pension reform increased also the minimum age for an early retirement to a total of five years. The transition period was determined (2010-2040), for which the right to old-age retirement could have been achieved under favorable conditions, as explained earlier and presented in Figures 13 and 14 and in Table 1 in Annex 3. These favorable conditions could be observed as a specific kind of early retirement, as they enable old-age retirement at the age earlier than statutory proscribed 67. That is significant for the 25 The Law on Changes and Amendments to the Law on Pension and Disability Insurance („Official Gazette of Montenegro“, No. 78/10) 24 pension system especially when it comes to woman, who as of 2013 are becoming eligible to old-age retirement as of age of 55 and with 35 years of service, i.e. as of age 60 and with 15 years of service). Such a combination of conditions for early retirement, especially related to the short number of years of service, does not exist in any EU country. Early start of the transition period (in terms of the years of age) for the old-age retirement, as well as possibilities for early retirement, crate conditions for the (too) early exit from the labor market and its related distortions, despite the permanent reduction of the pensions by 21% attached to the retirement under these conditions (based on the 0.35% of a decrement for each month of the retirement prior to the statutory retirement age, as will be further explained). Additionally, early start of retirement buts an additional burdening of the PAYG based pension system. Figure 13: Years of age-related conditions for an old-age retirement Figure 14: Years of age and years of service related conditions for in the transition period 2010-2040 (as of 2034 only for woman) old-age retirement for woman in the transition period 68.00 62.0 60.0 67.00 58.0 56.0 66.00 54.0 65.00 52.0 50.0 64.00 48.0 46.0 63.00 44.0 42.0 62.00 40.0 61.00 38.0 36.0 60.00 34.0 32.0 59.00 30.0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Men Woman Years of age Years of service (insurance) Source: The Law on Pension and Disability Insurance Source: The Law on Pension and Disability Insurance The Law further proscribes special conditions for early retirement through the merit (privileged) pensions of the two special groups of occupations; first, occupations subject to special retirement rules, and second, hazardous occupations. For these two groups of occupations the Law proscribes: (i) workplaces and occupations (in general, while detailed definitions are provided in the secondary regulation) for which the service/insurance period is calculated as extended service period, (ii) extended service period for insured persons with disabilities and for woman who gave birth to a child, (iii) lowering of the age limit for the entitlement to old-age pension, (iv) procedure and record-keeping of workplaces and occupations and insured persons for which the extended service period applies, (v) supervision, financing, and penalties. 25 The Law applies only to full-time employees (except in the case of employees with disabilities when the Law applies to also part-time employees) including also those whose full working time (referred to in Article 69) includes working hours shorter than 40 hours per week established for certain jobs because of special working conditions. The group eligible for the privileged pensions by the Law covers insured persons that are subject to general pension rules, but with accelerated service period factored in (Article 69). This group encompasses: 1. workplaces that have harmful impacts on health and work ability of employees, despite the fact that general and special protective measures prescribed by the regulations on occupational safety are applied; 2. jobs/occupations in which the physiological functions of the body after certain year of life are falling to such an extent that it prevents successful job performance; 3. insured persons with disabilities; and 4. insured women who gave a birth to a child. The first two items cover insured persons who are working on especially difficult, dangerous and unhealthy workplaces and jobs, and those insured persons who work at workplaces or jobs in which after reaching certain age she/he cannot successfully carry out their professional activity, years of service in the effective duration is calculated with an accelerated rate under the conditions stipulated by this Law. The Law proscribes that the degree of acceleration of insurance depends on the severity, risks and hazards of work, or the nature of work, and cannot exceed 50%. However, degrees of acceleration are stipulated by the secondary regulation (they range from 14 months registered as service for each 12 months actually worked). The Law further describes in detail the workplaces and jobs considered as hazardous (Article 70); “Workplaces or job at which service period is calculated at an accelerated rate because labor is especially difficult, dangerous and harmful to the health is the workplace, i.e. job, at which, despite the fact that all general and special protection measures prescribed by the regulations are applied, there are significant adverse impacts on health and working ability of the insured person that, during full working time, insured person is working next to sources of harmful effects, in a continuous work process. The full working time shall also include working hours shorter than 40 hours per week established for certain jobs because of special conditions. Workplaces or jobs at which service period is calculated at an accelerated rate because the performance of professional activities is limited after reaching certain age is the workplace or job where, because of the nature and difficulty of the job, physiological functions decrease to such an extent that prevents the continued successful performance.” 26 The Law defines the extended service period for insured persons with disabilities who have a physical disability of at least 70%; veterans from the first to the sixth group; civil war invalids of groups I to VI; blind persons, persons suffering from muscular dystrophy or muscular and neuromuscular diseases, paraplegia and cerebral palsy and multiple sclerosis. The degree of the extended service period for insured persons with disabilities is 12/15 (every 12 months spent in these positions shall be included in the service/insurance period as 15 months) in all cases (Article 74). Further on, the Law stipulates that insured women who gave a birth to a child are entitled to the accelerated service period in a way that they shall be granted six months of special service for each child they gave birth to (Article 74a).26 Insured persons are entitled to the calculation of the service period at an accelerated rate provided that they have effectively spent on the workplaces, i.e. on the jobs referred to in the Law (Article 70) a total of at least 10 years, or a total of at least five years if, based on the work performed on these working positions or jobs, their disability has been established (Article 71). The insurance period will be increased for the time effectively spent at work. When exercising the right to pension and disability insurance, cumulative years of service shall be calculated at an accelerated rate achieved on the workplace or jobs referred to in Article 70 of the Law. The minimum of 10-year working period is relatively short, compared to other countries. For example, in Poland the minimum required period is set at the level of 15 years. The Law defines also the age-limit lowering for the entitlement to old-age pension (Article 18) depending on the length of time for which the insurance period is calculated as extended service period and on the degree of extended service period. With that regard, for workplaces, occupations and disabled persons entitled to accelerated service period the age limit for entitlement to old-age pension, as defined in Article 17, Paragraph 1 (67 years of and at minimum 15 years of service) is lowered in the following way: i. by 1 year for every 6 years for workplaces or occupations where the extended service period is calculated as 12/14; ii. by 1 year for every 5 years for workplaces or occupations where the extended service period is calculated as 12/15 (including for the persons with disabilities, as defined in Article 74); iii. by 1 year for every 4 years for workplaces or occupations where the extended service period is calculated as 12/16; iv. by 1 year for every 3 years for workplaces or occupations where the extended service period is calculated as 12/18. 26 The Law on Changes and Amendments to the Law on Pension and Disability Insurance („Official Gazette of Montenegro“, No. 78/10). 27 In the period January 1, 2004 - December 31, 2012, stipulations of Article 18 as presented above were applied to the lowered retirement age (lower than 67) as stipulated in Articles 197, 198 and 199 (last two being valid only for women). However, in exception to the other persons entitled to accelerated service period, to whom the rules from the Article 18 above applied, a particular group of workplaces and occupations was entitled to additional lowering of the age limit (Article 197a): 1) authorized officers under the regulations on performing interior and police affairs; 2) authorized officers of the National Security Agency; 3) professional military personnel serving in the Army of Montenegro; 4) employees of the bodies and organizations that, in terms of regulations on defense, work at jobs where insurance service is calculated at an accelerated rate; 5) authorized officers in terms of regulations on the execution of criminal sanctions. Persons from this group became entitled to an old-age pension if they had at least 50 years of age and 20 years of insurance, of which at least 10 years effectively spent (and calculated in a cumulative way) on workplaces at which insurance service is calculated at an accelerated rate. Furthermore, even if the person did not have a status defined in 1) to 5) as listed above, but were working in these positions at least 20 years, they were entitled to an additional lowering of the age limit (Article 197b). In addition, the level of the pension of such persons was increased by 20% to the level calculated by the Law (Article 197v). Stipulations from these three articles were valid in the period January 1, 2009 – December 31, 2012 (as stipulated by the Article 197d)27. General exceptions were re-introduced with the 2010 amendments to the Law, enabling lowering of the age limit in the period 1 January 2013 - 31 December 2040, as defined under Articles 197dj (for both men and woman) and 198a (only for women). During the period 2013 – 2040, insured persons eligible for extended service period were entitled to lowering of the age limit for reaching old-age pension retirement age in accordance with the stipulations of Article 18, as presented above. As of the 2010 amendments to the Law that enabled transition period for reaching the retirement age of 67, stipulations of Article 18 as presented above were applied to the lowered retirement age as prescribed by the Articles 197dj and 198a (Annex 2). Starting from 2010 for each month of earlier retirement, before the statutory retirement age, monthly decrement is 0.35% (Article 27a), i.e. 21% for those who have retired five years before 27 Introduced through Artcile 12 of the Law on Changes and Amendments to the Law on Pension and Dissability Insurance („Official Gazzette of Montenegro“, No. 79/08). 28 the legal retirement age (further to that, pension level calculated with the decrement applied shall be retained also after reaching age of 67). In exception to this rule, for men who will start with early retirement in 2011 and by 2024 (Article 197ž), i.e. for women who will start with early retirement in 2022 and by 2040 (Article 198e), monthly decrement of 0.35% will be applied for each month of retirement prior to statutory retirement before certain years of age, starting with 62 in 2022 (Figure 15 and Table 2 in Annex 3). Annual early retirement decrement of 4.25% in Montenegro is set close to those in the countries with demographic features similar to Montenegro, actuarially neutral decrement ranges between 4-5%. However, it could be increased with a view to bring additional fiscal savings and social fairness and to demotivate early retirement (the latter particularly if the years of service conditioned for early retirement would not be changed). Figure 15: Year of age in time of early retirement triggering application of the 0.35% decrement in the transition period 2011-2024 for men and 2022-2040 for woman 67.00 67 66.5 66.50 66 66.00 65.5 65 65.50 64.5 65.00 64 64.50 63.5 63 64.00 62.5 63.50 62 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Men Woman Source: The Law on Pension and Disability Insurance 3.3. Workplaces and jobs subject to accelerated service period The list of workplaces and occupations subject to accelerated service period is regulated by the secondary regulation under the PDI Law (Article 72) and adopted by the Ministry of Labor and Social Welfare, except for the public administration and military in which cases the regulation is adopted by the Government (accelerated service period of the insured persons with disabilities and of insured women is regulated by the Law, as noted above). Workplaces and occupations, as well as the degree of extension of the service period are under the Law 29 and as of 200728 subject to review after five years (Article 72). As will be explained further, last reviews of the existing, i.e. adoptions of the new regulation regulating the degree of extension of the service period were made in April 2009 for military personnel, in December 2010 for public employees and in November 2010 for employees of private and state-owned companies. In November 2010 Ministry of Labor and Social Welfare adopted Regulation on determination of the workplaces and occupations for which the insurance service is calculated at an accelerated rate and the procedure and method for their determination 29 (Regulation).30 In Article 2, the Regulation defines 24 different sections (concerning economic activities, occupations and working conditions)31 within which there are 139 workplaces and jobs in private and state-owned companies.32 The list of workplaces and occupations subject to accelerated service period valid as of 2010 is narrower than the one valid in the former period. However, it is still broad ranging from ballet dancers, bus drivers, chimney sweepers to pilots. Depending on particular workplaces and occupations, the Regulation defines their entitlement to the one of the four degrees of the extended service period: 12/14, 12/15, 12/16, and 12/18, meaning that every 12 months spent in these positions shall be included in the service/insurance period as 14 (15, 16, or 18) months. Thus, retirement age of the persons working on such workplaces will be reduced proportionally to accelerated service period. The Regulation contains also the Methodology for preparation of professional documentation for establishing and reviewing of jobs subject to accelerated service period. According to the Regulation, employers, other interested parties and the Pension and Disability Insurance Fund of Montenegro can initiate establishment of the new and revision of the current workplaces and occupations subject to accelerated service period and acceleration degree. 28 The Law on amendments to the law on pension and disability insurance, („Official Gazette of Montenegro“, No. 47/07.) 29 „Official Gazette of Montenegro“, No. 71/10. 30 Before that, workplaces and occupations subject to accelerated service period were regulated by the Rulebook on establishing workplaces, i.e. jobs for which the service period is calculated with extended duration and on the procedure and method for their determination , „Official Gazette of Federal Republic of Yugoslavia, No. 48/97, 15/98, 34/98, 47/99, 48/99, 72/99, 7/2000, 17/2000, 26/2000, 48/2000, 22/2001, 51/2001, 15/2002, 32/2002, 64/2002 and 69/2002. This Regulation covered 41 different sections and over 400 workplaces and jobs (however, this Regulation was valid for the former state union with Serbia, which had the much more diversified economy). 31 The sections are as follows: I Mines; II Geological mining research; III Iron industry; IV Foundry; V Blacksmith; VI Refractory stonemason; VII Forestry; VIII Production of explosives and explosive materials; VIII Naval shipbuilding; IX Traffic; X Construction and maintenance of transmission; XI Construction; XII Printing industry; XIII Leather - manufacturing; XIV Textile industry; XV Pharmaceutical industry; XVI Power generation; XVII Meat industry; XVIII Working under low temperatures; XIX Working under water; XX Utilities; XXI Health institutions; XXII Emergency medical assistance; XXIII Mounting of technology equipment in power engineering and in chemical industry; XXIV Artistic activity. 32 Detailed list of these sections and workplaces, as well as of the degrees of extended service period, can be found in Annex 4. 30 Currently valid list of workplaces and occupations (adopted originally in 2003 and revised five times since) subject to accelerated service period in the public administration is regulated through Regulation on determining the workplaces, i.e. jobs in the state administration to which insurance period is calculated with an increased duration,33 adopted by the Government. Regulation is adopted in 2003 and has been amended at five occasions since, last time in December 2010. This Regulation defines (Article 3) five ministries and organizational segments of the Government and 25 groups of jobs (as listed in Annex 4) within that are subject to accelerated service period. The five ministries and organizational segments are: I Ministry of Internal Affairs, including the three organizational segments (in total 72 types of jobs): 1) The Directorate for Emergency Situations; 2) The Department for Internal Control of Police; and 3) The Police; II General Secretariat of the Government; jobs in the Air-service: use of aircraft; III National Security Agency; officials with special duties and powers in the Security and Intelligence System; IV Ministry of Justice; authorized officials with the task of execution of imprisonment, detention, educational measure of committal to an educational institution and ensuring judicial bodies; and V Ministry of Defense; authorized officials working in military intelligence, counter- intelligence and security affairs. For most of the workplaces and occupations, this Regulation defines entitlement to the degree of the extended service period 12/16 meaning that every 12 months spent in these positions shall be included in the service/insurance period as 16 months. Only the professional pilots in the public service are granted 12/18 degree.34 All the other rights related to the pension and disability benefits of this group of employees, i.e. persons insured within the PAYG system, have been defined by the Law. The Government has adopted in April 2009 a separate regulation to regulate accelerated service period for the military personnel, Regulation on the establishment of duties, or transactions in which the service period of professional military personnel shall be calculated 33 „Official Gazette of Montenegro“, No. 80/10 and 36/14. 34 Referring to the Regulation on determination of the workplaces and occupations for which the insurance service is calculated at an accelerated rate and the procedure and method for their determination, as issued by the Ministry of Labour and Social Welfare. 31 at an accelerated rate.35 This Regulation determines (Article 2) for which jobs/tasks active military personnel (civil servants working in the Army of Montenegro are not included) is entitled to pension insurance with extended service period: 1. 12/14 degrees are granted to; professional military personnel not covered by the next three provisions (articles 2, 3 and 4 of this Regulation). 2. 12/15 degrees are granted to; professional military personnel not covered by the previous two provisions (articles 2 and 3 of this Regulation) but who are carrying duties, i.e. occupations in the Army of Montenegro; 3. 12/16 degrees are granted to; all the jobs concerning electronic monitoring in the units for electronic reconnaissance and all occupations of crypto in units of the Army of Montenegro (Army) and the Headquarter of the Army of Montenegro (Headquarter) 2) intelligence affairs and military police units of the Army, the Headquarter and the Ministry of Defense;36 4. 12/18 degrees are granted to; professional military personnel carrying: a) duties of maritime diversion maker in a maritime squadron; b) duties in the company of special forces; c) duties of divers; d) duties in the decompression chamber or hyperbaric chamber - persons engaged in prospecting and coaching persons for the corresponding duties in the submarine service, if they have spent on such prospecting and coaching at least 90 hours per year. In addition to that, the Law on use of units of the Army of Montenegro in the international forces and the participation of Civil Guard, police and employees of the public administration in peacekeeping missions and other activities abroad37 prescribes that for the professional military personnel who are participating in international peacekeeping operations accelerated service period amounts 24 months for each 12 months (Article 15). 3.4. Supplementary contribution rate for pension insurance of the early retirees The Law on Social Insurance Contributions38 defines that employers are obliged to pay supplementary contribution rate for their employees who are eligible for calculation of the 35 „Official Gazette of Montenegro“, No. 35/09 and 36/14. 36 Ministry of Defence is added by the amendments to the Regulation made in July 2014, however, the rationale for this addition remains unclear as this type of occupations was already covered by the Regulation adopted by the Ministry of Labor and Social Welfare. 37 „Official Gazette of Montenegro“, No. 61/08. 38 „Official Gazette of Montenegro“, No. 78/10, 14/12, and 62/13. 32 insurance/service period as extended service period, with a view to finance their full pension (Article 8). This is defined by Article 8 of the Law, besides the contribution rate for pay-as-you- go (PAYG) pension insurance system (first pillar), which amounts to 20.5%39. Article 16 defines the following supplementary contribution rates for extended service period: 1. 6% for workplaces or occupations where the extended service period is calculated as 12/14; 2. 9% for workplaces or occupations where the extended service period is calculated as 12/15; 3. 12% for workplaces or occupations where the extended service period is calculated as 12/16; 4. 18% for workplaces or occupations where the extended service period is calculated as 12/18; 5. 28% for workplaces or occupations where the extended service period is calculated as 12/24; There is no supplementary contribution rate that should be paid for insured persons with disabilities. For the second and the third pillar supplementary contribution rates have not been defined. Supplementary contribution rates, along with reducing the retirement age for specific group of occupations are one of the three ways the governments are using to compensate failing of the salaries to provide financing of the early retirements and disability risks (the third one being imposing obligations on employers and trade unions to establish occupational pension funds). However, in today's technological progress and global world differences between occupations have been diminishing rapidly; jobs and working conditions have changed, labor mobility is higher, people take more jobs in their careers, and do more part time work than in the past. From the social angle, it is understandable that the society tends to provide some 39 The pension contribution rate is paid at rate of 5.5% by employer and at rate of 15.0% by the insured person when he/she is: a persons employed by the employer; persons performing temporary and occasional work; elected or appointed persons, if for the position of getting paid; citizens of Montenegro employed on the territory of Montenegro with foreign or international organizations and institutions, foreign diplomatic and consular missions or by foreign legal entities or individuals, as well as foreign citizens and stateless persons employed in Montenegro by domestic legal or private persons and by unless the international agreement provides otherwise. The same rule applies also to; foreign citizens and stateless persons who are on the territory of Montenegro employed by foreign legal entities and individuals, and by international organizations and institutions and foreign diplomatic and consular offices unless the international agreement provides otherwise and/or they are not insured under the regulations of another country . The pension contribution rate is being paid only by the insured person when employees are: 1) members of the board of directors in a company or other legal entity, and members of the management boards of public companies and institutions that for his work receive compensation; 2) citizens of Montenegro employed abroad; entrepreneurs and individuals who are engaged in professional or other activity as a primary occupation; 3) persons who achieve contracted fee, if they are not contributors on other grounds; and 4) farmers. Pension contribution is being paid by Employment Agency of Montenegro in the case of persons entitled to an allowance in accordance with the law regulating employment, and by the religous community for priests, clerics, monks, and nuns. 33 occupations or groups with additional security and benefits in their old age. Special treatment should not be accompanied by unfair or inequitable treatment. Therefore, finding equilibrium between the pension system's objectives of economic sustainability and social fairness presents a challenge in every society. In Montenegro, contribution rates (standard and supplementary) produce contributions insufficient for financing the early retirement (which is allowed penalty-free after 40 years of service, same as for non-hazardous occupations). For example, for a young 18-year old entrants, with average service period of 30 years, of which 20 in positions with accelerated 12/18 service,40 retiring at the age of 48, pension contribution would need to be at least 50% to yield a 50% replacement rate, which is more than double the current basic contribution rate.41 Currently, the insured person with 12/18 accelerated service period is subject to a contribution rate of 38.5% (20.5% standard plus 18% supplementary contribution rate). If the standard contribution rates are treated as given, it means that the supplementary contribution rates are not actuarially balanced and should be increased if the retirement period for all the occupations with accelerated service period shall remain unchanged or vice versa; if the retirement period is appropriately increased the supplementary contribution rates could remain unchanged. In any other case, early retirement and/or extra accrual rate and /or top ups to general formula provisions have to be financed from other sources, such as transfers from the budget. 3.5. Trend in number of employees entitled to ESP in Montenegro in the period 2011 – June 2016 For the purpose of precise analysis of their impact on the Montenegrin pension system, it is necessary to examine the details of the insured persons who are currently entitled to the extended service period (ESP), including their total number, age, etc. While the data of the Pension Fund in this area are limited and incomplete, the Tax Authority has adequate data that are representing a sufficient base for accurate and serious analysis, assuming that they cover all employees who are entitled to ESP. According to the data of the Tax Authority42, the total number of insured persons entitled to ESP, on various bases (Box 1), was at the end of June 2016 (8,303) for one quarter lower compared to the end of 2011 (11,122).43 At the same time, to a number of such persons 40 Yielding a total of 40 years of service, minimum required service period. 41 In the example above the retirement period would be similar to service period – around 30 years. 42 The Tax Authority data refer to employees for whom their employers paid contributions for ESP in the certain years (for the 2016 period refers to th e January - June). Data are presented in the periods in which the payments were made and not in those in which the liabilities for payments of contributions for ESP were created. 43 It should be noted that in theory it is possible that a number of persons entitled to ESP is bigger than the number shown in the Tax Administration data, because the data reflect the part of employees for whom their 34 insurance for ESP was paid on two, and rarely on the three bases. At the beginning of the observed period majority of such cases was registered in the corporate sector. However, their share was cut down with a reduction in the number of employees in the metal industry, which employed most of the insured persons entitled to ESP in the corporate sector. A similar trend was observed with police personnel. At the same time, an increase of multiple ESP insurance for persons employed in the military was recorded (Table 5). The existence of payment of the pension insurance for ESP on several bases for a certain number of insured person renders impossible the analysis of the data structure upon the number of persons entitled to an accelerated retirement; therefore, the analysis must be carried out upon the number of bases for payment of the ESP pension benefit, which is bigger than the number of persons entitled to ESP (from 4.6% in 2011 to 1.1% in 2016). This should be borne in mind when interpreting the data and indicators presented in the following analysis. Multiple insurances for ESP are a reflection of the practical needs of employers to use working hours of their employees in carrying out tasks which, in accordance with the relevant regulations, may create the conditions for paying contributions for ESP related insurance based upon different bases (which relate to the different acceleration rates). Table 5: Number and structure of the insured persons entitled to ESP, including according to the multiple ESP pension insurance bases 2011 2012 2013 2014 2015 2016 Total number of insured persons entitled to extended service period (insured persons) 11,122 9,758 10,046 9,452 9,551 8,303 Number of insured persons with payments of ESP upon two or three bases 406 313 378 104 165 52 Share of insured persons with ESP contributions paid on multiple bases in the total number of insured persons entitled to ESP for which contributions were paid to the Tax Authority 3.7 3.2 3.8 1.1 1.7 0.6 Structure of multiple payments of extended service period upon types of jobs (in %) Corporative sector 74.8 29.3 66.0 30.3 39.0 37.4 Police, NSA and (IECS) 0.5 2.4 2.9 6.3 2.1 9.3 Army 24.7 68.3 31.1 63.5 58.9 53.3 Total 100.0 100.0 100.0 100.0 100.0 100.0 Memorandum items Total number of bases used for amanlysis 11,653 10,118 10,435 9,592 9,807 8,397 Corporative sector includes, among others, the health system that largely comprises insured persons employed in public health institutions. However, due to limitations of the Tax Authority data it was not possible to extract these specific insured persons and include them as a separate segment of the public sector. This should be kept in mind when interpreting data that refer to corporate and public sectors, including in the forthcoming analysis of Tax Authority data in this section of the report. Source: Tax Authority of Montenegro employers have paid contributions for ESP. That refers to the private sector. However, bearing in mind that the right to ESP mainly have employees who work (or have worked) in companies in the metal industry that has in total gone through the privatization process, including reducing the number of employees through dismissal or retirement of redundancy, it can be considered that the number of employees with the right to early retirement options presented through the Tax Administration data reflects more or less true state of affairs. As for the state sector, the percentage of the basis for which there is a liability of the ESP payment, but not also a corresponding payment, is relatively small, as discussed below. Therefore, it may be considered that a problem of under- reporting of employees entitled to ESP in the public sector was not present. 35 Box 1: List of the codes for registration and payments of the ESP pension insurance 44 DESCRIPTION CODE CORPORATE SECTOR Pension insurance with extended service period calculated at an accelerated rate of 12/14 51 Pension insurance with extended service period calculated at an accelerated rate of 12/15 52 Pension insurance with extended service period calculated at an accelerated rate of 12/16 53 Pension insurance with extended service period calculated at an accelerated rate of 12/16 54 POLICE, NATIONAL SECURITY AGENCY (NSA) AND INSTITUTE FOR EXECUTION OF CRIMINAL SANCTIONS (IECS) Authorized officers in accordance with the regulations on the performing of Internal Affairs and Police business, authorized officers of the National Security Agency (NSA) and authorized persons under the provisions of the Execution of Criminal Sanctions (hereinafter: 71 authorized police officers) with extended service period calculated at an accelerated rate of 12/14 Authorized police officers with extended service period calculated at an accelerated rate of 72 12/16 Authorized police officers with extended service period calculated at an acceleratied rate 73 of 12/18 ARMY OF MONTENEGRO Professional military personnel serving in the Army of Montenegro and employees in agencies and organizations which, in accordance with regulations on defense, work at jobs 74 where insurance service is calculated at an accelerated rate (hereinafter referred to as military personnel) with pension insurance calculated at an accelerated rate of 12/14 Serviceman entitled to pension insurance calculated at an accelerated rate of 12/15 75 Serviceman entitled to pension insurance calculated at an accelerated rate of 12/16 76 Serviceman entitled to pension insurance calculated at an accelerated rate of 12/18 77 Serviceman entitled pension insurance calculated at an accelerated rate of 12/24 78 Source: Tax Authority of Montenegro In addition, according to the Tax Administration data in the period January 2011 - June 2016 there was a certain percentage of the insured persons entitled to ESP, primarily in the corporate sector, for which there was a liability for payment of contributions for ESP (or who were registered with the Tax Authority), but for whom the payment upon that liability was not performed by their employers in a given period for which the liability was created (i.e. in the period of one calendar year for which the data were observed). In fact, the highest percentages of unpaid contributions were recorded for codes 52 and 54 (22% and 51%, respectively), which were commonly used in manufacturing industries that undergo multiple privatization cycles (Table 6, rows 2 and 7). 44 Rules on the form, content, manner of filling and submitting of the unique reporting on calculated and paid personal income tax and contributions for social insurance ("Off. Gazette of Montenegro", no. 76/10 of 23.12. 2010, 63/11, 28/12, 8/13, 4/14, 49/14, 01/15, 02/15, and 10/16) include these bases, among others. The base 71 contained in the Rules is used for registration of payments to employees in the army, ANB and IECS who are entitled to ESP upon the acceleration rate 12/14. However, no applicable regulations governing the rights to ESP of these categories of employees contain this acceleration rate (but only the 12/16). 36 However, observed for the period 2011 – 2015 (we will exclude year 2016 from this observation because it contains payments of contributions for ESP for the period of only six months) the amount of liabilities upon which no payments were made was significantly reduced, for over 60%. Also, compared to 2011 payment of contributions for ESP was by 8.5% bigger in 2015 and it was also by 9% bigger compared to the amount of total liability for ESP contributions in that year. This is a result of payments for ESP contributions made by employers in certain years for the liabilities that were not paid on time in previous years. This trend was specifically pronounced in the period after 2013 in which the Law on Prevention of Illegal Business Activities was adopted, as was explained earlier in the document. In addition, in that year restructuring of tax and social contribution debts of employers to the state budget was expedited. In the observed period 2011 – 2015, the total amount of liabilities for payment of ESP contributions has decreased by 13.7%, i.e. by 1.4 Mill. Euro, which is a result of the drop in a number of insured persons entitled to ESP. The problem of non-payment of contributions for ESP was only marginally present when it comes to employees in the public sector, but as for them another type of anomaly was present – overdue payment of contributions for ESP. Namely, the amount of contribution that is not paid in the year in which the liability was created gets paid in the next and / or future years. This is evident from the rows 3 and 4, i.e. 8 and 9 in Table 6; thus, for almost all codes used by the public sector (72-78) the amount of payments made in a single one-year period was higher than the amount of the liability for that period, ranging from 24% to 46% (except for the code 72 for which there is a certain small percentage of the unpaid liabilities for contributions for ESP). As a result, the amount of total payments exceeded the amount of total liabilities for ESP contributions. On the one hand, it can be regarded as positive that the state is paying contributions for ESP if not on time, but then at least in a subsequent period. However, this practice, despite understanding its causes (insufficient availability of funds in the state budget to carry out the payment), prevents PIO Fund from adequate financial planning and execution of its budget. This causes an increase in transfers from the state budget, which jeopardizes its own planning and execution, but also complicates any serious analysis needed to design public policy in this area. 37 Table 6: Structure of liabilities and amounts paid for ESP contributions in the period 2011 – June 2016 For the period 2011 - Jun 2016 Total for all codes, per year Rb. Code 51 Code 52 Code 53 Code 54 Code 72 Code 74 Code 75 Code 76 Code 77 Code 78 2011 2012 2013 2014 2015 2016 Total amount of liabilities for payment of 1 ESP contributions, of which: 5,938,577 2,298,469 6,341,872 1,894,941 25,039,523 368,910 4,733,420 756,169 1,582,783 2,473,692 10,128,698 9,792,476 9,533,752 8,949,259 8,737,731 4,286,441 - amount of liabilities for which no 2 payments were made 725,242 514,415 646,544 970,533 13,379 38 96 80 0 0 898,391 799,119 461,891 297,847 356,742 56,336 - amount of liabilities for which payments 3 were made, of which: 5,213,336 1,784,054 5,695,328 924,408 25,026,144 368,872 4,733,324 756,089 1,582,783 2,473,692 9,230,307 8,993,358 9,071,861 8,651,412 8,380,989 4,230,104 4 - paid 4,739,319 1,437,897 5,254,383 532,384 24,408,492 525,017 5,859,287 1,097,716 2,140,141 3,610,136 8,767,499 8,950,958 9,133,933 8,934,003 9,513,645 4,304,734 5 Structure, in %, of the liabilities for payment 6 of contributions: - share of liability for which no paymant 7 was made (2:1) 12 22 10 51 0.1 0.0 0.0 0.0 0.0 0.0 9 8 5 3 4 1 - share of liabilities for which payments 8 were made (3:1): 88 78 89.8 49 99.9 100 100 100.0 100 100 91 92 95 97 96 99 9 - paid (4:3) 91 81 92.3 58 98 142 124 145 135 146 95 99.5 101 103.3 114 102 10 11 Structure of the total amount of liabilities: 12 - paid (4:1) 80 63 82.9 28 97 142 124 145.2 135 146 87 91 96 99.8 109 100 13 - nonpaid 20 37 17.1 72 3 -42 -24 -45.2 -35 -46 13 9 4 0.2 -9 0 Source: Tax Authority of Montenegro 38 Table 7: Structure of the total number of bases used for registering liabilities for payments of ESP contributions, 2011-16 2011 2012 2013 2014 2015 2016 2016/2011 Total number of bases, of which: 11,653 10,118 10,435 9,592 9,807 8,397 -28 in corporate sector 4776 3,431 3539 3228 3411 2548 -47 in public sector, of which: 6877 6687 6896 6364 6396 5849 -15 in police, NSA and IECS 4847 4,745 5130 4574 4543 4148 -14 in military 2030 1,942 1766 1790 1853 1701 -16 Structure of bases in corporate sector 41.0 33.9 33.9 33.7 34.8 30.3 in public sector, of which: 59.0 66.1 66.1 66.3 65.2 69.7 in police, NSA and IECS 41.6 46.9 49.2 47.7 46.3 49.4 in military 17.4 19.2 16.9 18.7 18.9 20.3 Source: Tax Authority of Montenegro The total number of bases, and similarly total number of employees entitled to ESP, was reduced from 2011 to the end of June 2016 to 3,256 or by 28%; at the same time the number of these bases decreased to a greater extent in the corporate then in the public sector (by 2,228 or 47% versus 1,028 or 15%). Consequently, the share of the bases for calculation of ESP contributions of the corporate sector in the total number of bases was reduced in the reporting period from 41% to 30.3% in favor of the bases relating to employees in the public sector (Table 7). At the end of June 2016, in the total number of bases (8.397), the largest share accounted for by men entitled to ESP (7,807 or 93%), while the share of bases that referred to women was significantly lower (590 or 7%). This structure was only slightly changed from 2011 (Table 8) despite higher nominal and relative reduction in the number of bases related to the men entitled to ESP (by 3,107 persons or 28.5%) compared to a reduction in the number of bases related to women entitled to ESP (by 149 persons or 20.2%). There, a share of the bases related to women entitled to ESP at the end of June 2016 was slightly higher in the public in relation to the corporate sector (7.5% vs. 6.0%). The structure of the bases pertaining to men was changed so that the number and proportion of men increased in the public at the expense of the corporate sector (where the number of insured persons entitled to ESP was reduced in the manufacturing industry). Increase of the share of the public sector occurred despite the reduction in the number of employed men, which was greater in the police, the NSA and the PSEA than in the army (641 vs. 327 bases). The reason for that was because a reduction in the number of men in corporate exceeded the reduction of such number in the public sector. The same trend, in terms of their share in the corporate or public sector was recorded in the structure of the bases that are related to women. When observed upon the years of age, of the insured persons entitled to ESP, it is evident that the range from 41 to 50 years of age has the largest share in the total number of bases, where the latter has decreased over the observed period 2011 - June 2016 (Figures 16 and 17). The share of this age range has increased significantly in 2014 (43.6%) in comparison with 2011 (39.6%). The share of the age ranges from 31 to 40 years of age is growing even though 39 the nominal number of people in this range fluctuates at around 3,000 thousand. The number of people ranging from 21 to 30 years of age has been increasing both in nominal and relative terms. The share of both these ranges in the total number of grounds is growing at the expense of reducing the number of persons older than 50 years, which is expected due to the very essence of retirement plan with accelerated rate. Table 8: Gender structure of bases for registration and payments of ESP contributions, 2011 – 2016 2011 2012 2013 2014 2015 2016 Total number of bases, of which: 11,653 10,118 10435 9592 9807 8397 Men 10,914 9414 9657 8898 9115 7807 Women 739 704 778 694 692 590 Total number of bases per gender, in %: Men 93.7 93.0 92.5 92.8 92.9 93.0 Women 6.3 7.0 7.5 7.2 7.1 7.0 Total number of bases per sector and gender, in %: In corporate sector: men 95.0 93.3 92.6 92.6 93.2 94.0 women 5.0 6.7 7.4 7.4 6.8 6.0 In public sector: men 92.8 92.9 92.5 92.8 92.8 92.5 women 7.2 7.1 7.5 7.2 7.2 7.5 Total number of bases per gender and sector, in %: Men: in corporate sector 41.6 34.0 33.9 33.6 34.9 30.7 in public sector, of which: 58.4 66.0 66.1 66.4 65.1 69.3 in police, NSA and IECS 40.4 46.0 48.4 47.0 45.6 48.3 in army 18.0 20.0 17.7 19.4 19.5 21.0 Women: in corporate sector 32.5 32.8 33.8 34.3 33.4 25.8 in public sector, of which: 67.5 67.2 66.2 65.7 66.6 74.2 in police, NSA and IECS 58.7 59.1 58.5 56.1 56.1 63.6 in army 8.8 8.1 7.7 9.7 10.5 10.7 Source: Tax Authority of Montenegro At the end of June 2016 compared to the end of 2011 a reduction of the number of bases relating to persons older than 50 years (2,269) accounted for a 70% reduction in the total number of bases (3,257). In this reduction about 81% (1,832) was related to the reduction in the corporate, while 19% referred to the reduction in the public sector. In the corporate sector, the reason for this abatement was mainly a reduction of the number of employees during and after the privatization of the state-owned companies (ex. in KAP, Bauxite Mine and Ironworks). In the public sector the reason was the targeted reduction in the number of employees, which is mainly made possible through the process of amendments to the Law on Pension and Disability Insurance, which generally provided more favorable early retirement options, as explained above. This is probably the reason why in this period there was a decrease in the number of bases in the range of 41-50 years of age (527 in the public and 463 in the corporate sector), as well as in the range of 31-40 years of age (162 in the public and 64 40 in the corporate sector), while the number of bases ranging from 21 to 30 years of age increased by 228, to a greater extent in the corporate than in the public sector (125 vs. 103 persons). Figure 16: Total number of bases for registration of insured persons Figure 17: Structure of the total number of bases for registration entitled to ESP (right scale) and their structure according to the of insured persons entitled to ESP according to the range of years range of years of age (left scale), in nominal terms, 2011 - June 2016 of age, in %, 2011 – June 2016 5,000 14,000 100% 4,609 4,324 17.4 16.8 14.2 4,500 4,232 4,183 4,224 90% 21.8 23.7 12,000 29.7 4,000 80% 3,615 3,465 3,500 10,000 70% 43.1 3,000 60% 43.6 43.1 8,000 41.8 41.4 2,478 2,500 2,201 50% 39.6 6,000 2,000 1,667 1,644 40% 1,500 30% 1,196 4,000 32.7 30.9 30.8 1,000 20% 29.8 28.7 25.5 2,000 500 10% 6.7 6.2 8.1 9.4 9.9 0 0 0% 5.2 2011 2012 2013 2014 2015 Jun-16 2011 2012 2013 2014 2015 Jun-16 up to 20 years 21 - 30 years 31 - 40 years up to 20 years 21 - 30 years 31 - 40 years 41 - 50 years over 51 years Total 41 - 50 years over 51 years Source: Tax Authority of Montenegro Source: Tax Authority of Montenegro and author's own calculation When the share of the various acceleration rates in the total number of bases is observed, it can be seen that the overall reduction in the number of bases (3,257) was contributed the most by the reduction in acceleration rates 12/14 (by 1,380 bases or 42.4%), as shown in Table 9. This was mainly a result (with up to 99%) of a reduction in the number of bases used by the corporate sector; however, besides this sector, the same acceleration rate was used also for a portion of the military personnel entitled to ESP in the Army of Montenegro and employees of the health sector (still, in the observed period no health institution registered or paid contributions for ESP for their employees). A relatively large reduction was recorded with acceleration rates 12/16 and 12/15 (whose share in the overall reduction was 31% and 22%, respectively), while the reduction of the number of bases within acceleration rates 12/18 and 12/24 was significantly lower (by 3% and 2%, respectively). Within the reduction of the acceleration rate 16/12, which in the reporting period amounted to 1,002, the largest share of 699 (or 70%) had a reduction within the code 72 (authorized police officers). Most of the remaining reduction in the context of this acceleration rate related to the corporate sector (295 or 29.5%), while only 8 or 0.5% related to the reduction of military personnel. The largest share in the acceleration rate 12/16 has the code 72 (authorized police officers), on average about, 82%, while the share of the base 53 (corporate 41 sector) and 76 (military personnel), is significantly lower (15% and 3%, respectively), as presented in Figure 18. Table 9: Structure of bases for payment of ESP insurance according to the acceleration rate, 2011 – June 2016 2011 2012 2013 2014 2015 Jun-16 Difference Change 2016/2011 2016/2011, in % Corporate sector 12_14 2,711 2,033 1,923 1,696 1,807 1,343 -1,368 -50 12_15 941 470 534 527 584 363 -578 -61 12_16 988 820 992 907 851 693 -295 -30 12_18 136 108 90 98 169 149 13 10 Total 4,776 3,431 3,539 3,228 3,411 2,548 -2,228 -47 POLICE, NSA & IECS 12_16 4,847 4,745 5,130 4,574 4,543 4,148 -699 -14.4 ARMY OF MONTENEGRO 12_14 121 118 102 103 118 109 -12 -9.9 12_15 1,395 1,321 1,268 1,318 1,325 1,265 -130 -9.3 12_16 186 175 136 136 201 178 -8 -4.3 12_18 200 198 154 149 145 102 -98 -49.0 12_24 128 130 106 84 64 47 -81 -63.3 Tozal 2,030 1,942 1,766 1,790 1,853 1,701 -329 -16.2 Total 12_14 2,832 2,151 2,025 1,799 1,925 1,452 -1,380 -48.7 12_15 2,336 1,791 1,802 1,845 1,909 1,628 -708 -30.3 12_16 6,021 5,740 6,258 5,617 5,595 5,019 -1,002 -16.6 12_18 336 306 244 247 314 251 -85 -25.3 12_24 128 130 106 84 64 47 -81 -63.3 GRAND TOTAL GRAND TOTAL 11,653 10,118 10,435 9,592 9,807 8,397 -3,256 -27.9 Source: Tax Authority of Montenegro Within the reduction of the acceleration rate 12/15, which in the reporting period totaled 708, or 30.3%, the largest decrease of 578 (or 61%) had a reduction of the code 52 (the corporate sector), while the reduction of the code 75 (military personnel) amounted to 130 (or 9.3%), as presented in Figure 19. Acceleration rates 12/18 and 12/24 are used for the ESP entitled employees of the Army of Montenegro; the total number of bases for these two acceleration rates dropped by the end of June 2016 by about 36%, to less than 300 (Table 9). This development led to an increase in the share of acceleration rates 12/16 in the total number of basis from 51.6% to 59.8% (Figures 20 and 21) at the end of June 2016. 42 Figure 18: Structure of acceleration rate 12/16 according to the codes Figure 19: Structure of acceleration rate 12/15 according to the codes it is consisted of, in the period 2011 –June 2016 it is consisted of, in the period 2011 –June 2016 Jun-16 693 4,148 178 Jun-16 363 1,265 1,628 2015 851 4,543 201 2015 584 1,325 1,909 2014 907 4,574 136 2014 527 1,318 1,845 2013 992 5,130 136 2013 534 1,268 1,802 2012 820 4,745 175 2012 470 1,321 1,791 2011 988 4,847 186 2011 941 1,395 2,336 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Code 53 Code 72 Code 76 Code 52 Code 75 Source: Tax Authority of Montenegro and author's Source: Tax Authority of Montenegro and author's own calculation own calculation Figure 20: Total number of bases (right scale) and their structure (left Figure 21: Structure of total number of bases upon the acceleration scale), in nominal terms, in the period 2011 – June 2016 rates, in %, in the period 2011 – June 2016 7,000 14,000 100% 6,258 6,021 6,000 5,740 5,617 12,000 90% 5,595 5,019 80% 5,000 10,000 70% 51.6 56.7 60.0 58.6 57.1 59.8 4,000 8,000 60% 3,000 6,000 50% 2,000 4,000 40% 20.0 1,000 2,000 30% 17.7 17.3 19.2 19.5 19.4 20% 0 0 2011 2012 2013 2014 2015 Jun-16 10% 24.4 21.3 19.4 18.8 19.6 17.3 12_14 12_15 0% 12_16 12_18 2011 2012 2013 2014 2015 Jun-16 12_24 Total number of bases 12_14 12_15 12_16 12_18 12_24 Source: Tax Authority of Montenegro and author's Source: Tax Authority of Montenegro and author's own calculation own calculation Data submitted by the Tax Authority show a favorable trend (Table 10) of the reduction in number and change in structure of insured persons who are entitled to ESP, despite an increase of the average number of employees in Montenegro by 7.7% in 2015 compared to 2011, according to the official employment data by Monstat. This trend can be attributed to the reduction of the number of miners, employees of manufacturing and of the state-owned enterprises that have been privatized as of 2011. This trend was also contributed by the 43 reduction in the number of civil servants who have retired on the basis of one-off opportunities for early retirement, enabled through the amendments to the Law on Pension and Disability Insurance, as previously explained. Thus, the total number of the insured persons entitled to ESP decreased by 25.3%; concomitantly, the number of insured persons in the army, police, NSA and IECS decreased by 33.8%, while in the corporate sector it was reduced by almost 43%. Table 10: Employment and number of insured persons entitled to ESP, 2011 – June 2016 June Nominal 2016/2011*, difference No. 2011 2012 2013 2014 2015 Jun-16 in % 2016 - 2011 1 Official employment 163,082 166,531 171,474 173,595 175,617 175,026 7.7 11,944 Number of insured persons, entitled to ESP, of 2 which: 11,122 9,758 10,046 9,452 9,551 8,303 -25.3 -2,819 Number of insured persons, employed in 3 Police, NSA & IECS 4,847 4,745 5,130 4,574 4,543 4,148 -14.4 -699 Number of insured persons, employed in 4 Army 1,928 1,734 1,648 1,726 1,758 1,673 -13.2 -255 Number of insured persons entitled to ESP, w/o Army, Police, NSA & IECS personnel (2 - 3 - 5 4) 4,347 3,279 3,268 3,152 3,250 2,482 -42.9 -1,865 Share of insured persons, entitled to ESP (w/o Army, Police, NSA & IECS personnel) in the 6 total official employment (5 : 1) 2.7 2.0 1.9 1.8 1.9 1.4 Share of insured Army, Police, NSA & IECS personnel entitled to ESP (w/o ) in the total official employment ((3+4) : 1) 4.2 3.9 4.0 3.6 3.6 3.3 7 Memorandum items Employment according to the Labor Force 8 Survey (LFS) , of which: 196,000 201,000 201,900 216,300 221,700 224,700 14.6 28,700 Employed persons working less then full 9 working hours 9,000 9,100 6,700 13,500 13,400 10,300 14.4 1,300 Share of insured persons, entitled to ESP (w/o Army, Police, NSA & IECS personnel) in total 10 number of employees according to LFS (5 : 8) 2.2 1.6 1.6 1.5 1.5 1.1 Source: Tax Authority of Montenegro and author's own calculation Owing to this downward trend, the proportion of the number of the ESP entitled employees was reduced from 2011 to June 2016 from 6.9% to 4.7%. However, even more accurate impression of the reduction shall be acquired if the total number of employees with accelerated service is observed without those employed in the public sector (in the military, the police, the NSA and the IECS), i.e. if only those employed in the corporate sector are observed. Their share in total official employment was reduced in the reporting period from 2.7% to 1.4%, which is a percentage adequate to the one considered as international best practice. These percentages are even lower if the number of the ESP entitled employees in the corporate sector is viewed in relation to employment according to the Labor Force Survey, conducted by the State Bureau of Statistics, Monstat.45 However, the share of the ESP entitled 45 Namely, according to the Labour Force Survey (LFS) the number of employees in Montenegro is higher than the official average number of employees ranging from 20% to 25% (in 2011 and 2015, respectively), or up to 28% in June 2016. This percentage seems to be somewhat smaller if we exclude employees covered by the LFS that do not work full-time (ranging from 15% to 19% and 23% in these years and periods). In this regard, the 44 employees of the Army of Montenegro, police, the NSA and the IECS in the total official employment, amounting to 3.3% in June 2016, remains very high. According to estimates of employed in police and military in Montenegro,46 in 2014 some 95% of employees in police (internal affairs) were entitled to ESP. The share in army (national defense) in the same year stood at 14%, largely due to ESP eligibility revision in the military in 2009. 3.6. Conditions for re-entering of the retirees to the labor market Many options for early retirement (including through early start of the transition period for old-age retirement), eligible under the PDI Law, per se create an environment supportive to the early retirement and contribute to the increase of the PIO Fund expenditures for pensions. At the same time, the PDI Law implicitly allows employment of the old-age and early retirees and their reactivation on the labor market. The Labor Law does not prescribe any age limitation for any type of employment contracts (open ended time, part-time or lump sum assignments, i.e. honorariums). It only mandates that the employment contract ends at the age of 67 but can be extended if the parties agree. The Law on Personal Income Tax (Article 46)47 treats retirees48 employed upon open-ended contract equal to any other employee; thus, they are obliged to pay 9%, i.e. 13% personal income tax (PIT) depending on the level of their salary (up to, i.e. over Euro 720, respectively). The Law on Social Insurance Contributions provides even an incentive for the employed retirees,49 as in the case of their employment upon an open-ended time contract their employers would not be obliged to pay for their health and insurance from unemployment, but only for their pension insurance. The same pension contribution rates would apply as for any other employee, meaning that employee, i.e. retiree would pay 15%, and employer 5.5% pension contribution (20.5% in total) calculated to the gross salary.50 However, if such retiree would get employed additionally upon the part-time contract, he/she would be obliged to pay on this new contract only a PIT at the rate of 9%, calculated to the 70% of the compensation received upon this part-time contract (but they would not be obliged to pay a pension share of the ESP entitled employees in the total number of employees as per LFS would be even lower compared to the share calculated against the official employment; it would range from 2.2% in 2011 to 1.1% in June 2016. 46 The Military Balance, International Institute for Strategic Studies, 2016; and World Development Indicators 2016 for military personnel; and EUROSTAT for employed in police (internal affairs). See section 4.4 for more details. 47 “Official Gazette of Republic of Montenegro“, No. 65/01, 12/02, 37/04, 29/05, 78/06 and 04/07 and “Official Gazette of Montenegro”, No. 86/09, 73/10, 40/11, 14/12, 6/13, 62/13, and 60/14. 48 It has been circumstantially understood that these stipulations refer to the old-age and early retirees as well as to the exceptions among the family pensioners, as explained further in the document. 49 Ibid. 50 Tax Practice for February 2015, Document issued by Montenegrin Tax Authority, No. 03/2- 2684/2-15, as of February 20, 2015). 45 insurance as they would already be paying it upon the open-ended contract). Still, if the retiree is not employed upon open-ended contract and gets employed upon only a part-time contract, he/she would be obliged to pay both PIT at the 9% rate and pension contribution at 20.5% rate, applied to 70% compensation received upon their part-time contract.51 In the case a retiree would be employed as a member of the governing board of the public or private company, he/she would be obliged to pay the PIT at the rate of 9%, i.e. 13% depending on the level of his/her compensation (up to, i.e. over Euro 720, respectively). He/she would also be obliged to pay pension contribution at the rate of 20.5% calculated to the compensation received for their position in the governing board.52 In contrast, the PDI Law clearly defines suspending of the pension payment to the beneficiaries of the family pensions who start to work or get self-employed in the territory of Montenegro or abroad (Art. 112, paragraph 3). Exceptions to this rule (Art. 112, paragraph 4) are the beneficiaries of survivors' pensions who are children under the age of 19 or children over this age attending school, but no later than 24 years of age, or 25 years of age if attending faculty that lasts longer than four years (Art. 46, para 1, 2 and 3). Exemptions also apply to beneficiaries of family pension engaged in an activity (who are not covered by the pension insurance in any other way) carrying out the work based on the part-time contract, lump sum assignments, as well as activities under other contracts in which they are entitled to a compensation (Art. 11, paragraph 1, item 2). In such cases, features of the Law on Social Insurance Contributions and of the Law on Personal Income Tax also apply. Widows and widowers, according to the PDI Law of 2003 (Art. 44, paragraph 1, item 1) are able to acquire the right to a survivor's pension and to permanently retain it if they have, at the time of the death of their spouses, reached 52 years of age. From 2010 to 2012, the age limit for widowers was 50, and for the widows 48 years and six months, i.e. 49 years, and 49 years and six months, respectively (Art. 207). This rule was somewhat modified in 201053 (Art. 207a) in a way that the life limit changed to 50 years of age attained in 2013, which was gradually increased by six months of age until 2017 and the age of 52 years. From the standpoint of ensuring social rights for unemployed spouses of deceased insured persons, these solutions are generous and friendly but do not provide an incentive to stay in the labor market. The necessary motivation, of the employers primarily, for hiring these social categories, could possibly be provided through other laws, primarily the Law on Social Insurance Contributions and the Personal Income Tax Law. To old-age pensioner who gets employed or self-employed the PDI Law provides the right to a re-determination of pension upon termination of the employment or business, and if he/she 51 Tax Practice for March 2015, Document issued by Montenegrin Tax Authority, No. 03/2- 4116/2-15, as of March 23, 2015). 52 Tax Practice for November 2015, Document issued by Montenegrin Tax Authority, No. 03/2- 16341/2-15, as of November 10, 2015. 53 “Official Gazette of Montenegro“, No. 78/10. 46 was in the insurance under this Law for at least a year (Art. 112, paragraph 1). This possibility is given also to users of early retirement pensions, which, after the termination of re- employment or self-employment, are entitled to an old age or early retirement. The PDI Law does not define how to perform again the determination of pensions "returnees", thus the re- determination should be implicitly done in the manner in which the determination of the old- age pensions is made to all pension beneficiaries. That manner implies that the level of pension is determined on the basis of net personal income achieved during the total number of years through which the worker paid in pension contributions. In doing so, on the basis of annual personal coefficient determined for each calendar year according to the provisions of Articles 19 to 27 of the Law favorable personal coefficient shall be calculated, which the insured person has achieved during any from 12 to 40 consecutive years, depending on the calendar year of retirement (Article 200), as presented in Figure 22. As discussed above, the legal options for re-employment of the first-time pensioners are liberal and thus have a positive effect on the labor market; the PDI Law allows keeping the right on pensions earned at the first time retirement in the case of employment of the old-age and early old-age retirees under any type of the employment contract. Only the beneficiaries of the family pensions are not able to keep their pensions in the case of employment or self- employment (still, there are two exceptions to this rule, one of which refers to widows and widowers). Concomitantly, other relevant laws (the Labor Law and the Law on Personal Income Tax) do not treat employed retirees any different than any other employee, while the Law on Social Insurance Contributions provides even incentive in the particular cases of employment of the retirees. However, increase of employment of the retirees and of any Figure 22: Number of consequent years used for calculation of personal coefficient 45 40 40 38 36 35 34 32 30 30 28 26 25 24 22 20 20 18 16 15 14 12 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Law on Pension and Disability Insurance other employable categories of the population in Montenegro will largely depend on the creation of conditions for stronger and faster economic development. 47 4. Review of international practice in the area of early retirement for special and hazardous occupations As indicated in the introduction, many of the European countries are currently introducing pension system changes that are aimed to prolong working lives and increase retirement age. The demographic change projected in the EU countries, if not accompanied by reform measures would lead to an increase in public pension expenditure. Due to ageing populations, demographic factors are projected to be the main (and usually the only) increasing driver of public pension expenditure in the upcoming decades. The contribution of the demographic factors to the change in public pension spending per decade until 2060 is assessed in (European Commission DG ECFIN, 2015). The demographic effect is at its strongest in the first two decades of the projections (2013- 2030), when the post-war baby-boom generation reaches the retirement age54. Tightening of the eligibility for a public pension (through higher retirement age and/or reduced access to early retirement and better control of alternatives to early retirement) is one of the ways to constrain public pension expenditure in nearly every Member State. Legal retirement age is the most important parameter of pension systems that affects transition from work to retirement. (Chomik & Whitehouse, 2010) analyzed pensionable ages in the OECD countries since 1950s, indicating a shift in trend of falling retirement age that occurred in mid 1990s (Figure 23). Pensionable age started to increase for both men and women, which is expected to continue as a result of implemented reforms through raising the general retirement age and equalization of retirement ages for men and women. As shown in Figure 24, in most of the EU countries the legal retirement age will be increasing between 2011 and 2040. It is expected to reach 67 for men and women in Czech Republic, France, Germany, the Netherlands, the UK, Italy and Sweden and even exceed this limit in Ireland, Italy, Finland and Denmark (where the retirement age is expected to reach 70). 54 The smallest impact is projected for Luxembourg least over the 2013- 2020 period (+0.6 p.p.) while the demographic impact is the largest in Poland (+3.5 p.p.). The impact for the EU as a whole is 1.7 p.p. over the same period. Between 2013 and 2060 the demographic impact is projected to be the lowest (3.6 p.p) in Denmark and highest (12.4 p.p.) in Poland. 48 Figure 23. Average pensionable age in OECD countries by gender, 1950-2050 Pensionable age (years) Men Women 65 64 63 62 61 60 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: (Chomik & Whitehouse, 2010) Figure 24. Legal retirement age for men and women in the EU countries, 2011 and 2040 70 65 60 55 LV SK SI HU LT BG EE RO PL CZ MT AT BE CY EL LU PT FR DE NL ES UK SE IE FI IT DK Men in 2011 Women in 2011 Men in 2040 Women in 2040 Creating conditions for prolonging working lives through different measures were underlined as important policy direction already from the beginning of 1980s. International Labor Organization in its Older Workers Recommendation No 162 adopted on June 4, 1980 underlines that countries should, within the framework of a national policy to promote equality of opportunity and treatment for workers, whatever their age, and of laws and 49 regulations and of practice on the subject, take measures for the prevention of discrimination in employment and occupation with regard to older workers. Additionally, where the reasons for the difficulties in adaptation encountered by older workers are mainly related to advancement in age, measures in respect of the type of activity in question should to the extent practicable be applied so as to: i. remedy those conditions of work and of the working environment that are likely to hasten the ageing process; ii. modify the forms of work organization and working time which lead to stress or to an excessive pace of work in relation to the possibilities of the workers concerned, in particular by limiting overtime; iii. adapt the job and its content to the worker by recourse to all available technical means and, in particular, to ergonomic principles, so as to preserve health, prevent accidents and maintain working capacity; iv. provide for a more systematic supervision of the workers' state of health; v. provide for such supervision on the job as is appropriate for preserving the workers' safety and health. These recommendations are in line with the policy of active ageing, which is a part of the Europe 2020 strategy, focusing on prolonging working lives. There are many factors that relate to improvement of work ability, which are shown in Figure 25. Such policies should be implemented in parallel with the legislated increases in retirement age, to prevent potential social losses. Figure 25. Work ability and related factors Source: (Ilmarinen, 2005: 133) 50 There are three main policy directions, which are implemented in the EU and the OECD countries. (OECD, 2013) underlines that recent pension reforms, among others, are aimed at lengthening working lives so that people build higher pension entitlements and improve their retirement income. Measures adopted have been of three main types: i) increases in the statutory retirement age; ii) improved provision of financial incentives to work beyond retirement age, e.g. through work bonuses and increases in pension benefit at retirement; and iii) less or no early retirement schemes. It should be noted that there are many policies and solutions that allow people working in hazardous and arduous conditions to prolong their working lives. Such policies are desirable in the context of population ageing and the need to improve employability of older workers, as indicated in Figure 25. Such measures include (see for example: Riedel & Hofer, 2013; Syndex, 2014): • lifelong learning to improve or acquire competences and qualifications so that a new job can be envisaged; • improvement of working conditions, in particular removing the conditions that are related to health worsening; • reduction of working time; • changes in work organization; • better reconciliation of professional and private life (including also solutions supporting careers of older family members); • adapting work places to the needs of older workers; • developing opportunities for flexible work arrangements. Given the factors related to demographic, social and economic changes, the major challenge is to move forward from reparation/compensation to prevention whenever possible . (European Commission, 2012; Syndex, 2014). In the last decade, most of the 34 OECD countries have passed legislation that raises the retirement age or the length of work requirements that earn entitlement to full pension benefits. In this section we present the summary of the outcome of early retirement policy changes in the EU countries with respect to the retirement age and share of population in early retirement as well as examples of recent reforms in the field of early retirement and labor market that were recently enacted in the EU countries, drawing from the summary presented in the 2015 Ageing Working Group report (European Commission DG ECFIN, 2015). We also provide some statistical information on the use of early retirement based on the results of the special LFS module conducted by the Eurostat in 2012. This statistical data allows for better understanding of transition from employment to retirement in the EU countries. 51 A specific example of Poland is also shown, as one of the most comprehensive reform activities conducted in recent years in transition economies that leads to the positive outcomes with respect to reduction of early retirement and stimulating higher labor market participation of older workers. We conclude with an analysis of how the international practices are applicable in the case of Montenegro. 4.1. Transition to retirement in the EU countries The results from the EU Labor force survey (LFS) and its 2012 ad hoc module on the transition from work to retirement for the European Union (EU) allows to investigate the magnitude of challenges related to the existence of early retirement provisions in the EU countries. There is a significant variation in the scale of early retirement between the EU countries. In 2012, 35.1 % people aged 50-69 in the EU-28 received a pension. Of these, 87.4 % received an old-age pension. The share of people receiving a pension was the highest in many of the transition economies, which reflects the generous approach to early retirement in these countries. In 22 Member States, over 20 % of persons receiving an old-age pension retired early. The highest proportions were reported in Italy (73.9 %), Ireland (68.5 %) and Spain (59.9 %) and the lowest in Bulgaria (5.2 %), the Czech Republic (5.3 %) and Estonia (10.9 %). Figure 26. Pension receivers (aged 50-69) type of pension, 2012 Source: Eurostat, LFS ad hoc module 2012 52 Drawing early retirement pension in many countries does not mean withdrawal from the labor market. Some 17% of old-age pensioners still work. The reason for continuing employment, particularly in many of the new member states is the need of additional income. This indicates that early retirement with low benefit may not be an efficient solution, as people still need supplementary source of income and have higher risk of poverty at older ages, when they will not be able to work anymore. Figure 27. Employed old-age pensioners (% of old-age pensioners), 2012 Source: Eurostat, LFS ad hoc module 2012 Figure 28. Employed old age pensioners, Reasons for continue working, 2012 (%) Source: Eurostat, LFS ad hoc module 2012 53 On average in the EU-28, persons aged 50-69 who receive an old-age pension and who took part in an early retirement scheme were 58.0 years old when they retired. Those receiving an old-age pension who did not take part in an early retirement scheme were 59.9 years old on average, i.e. an average of 1.9 years older. Broken down by countries, the difference in the retirement age is biggest in Italy (a gap of 4.7 years, the difference between retiring at 61.5 and at 56.8), Ireland (a gap of 4.6 years, i.e. retiring at 64.1 compared to 59.5) and Spain (a gap of 4.3 years, i.e. retiring at 64.3 compared to 60.1). These countries are also among those having a higher percentage of early retirements. Figure 29. Retirement age of persons using an early retirement scheme, persons not using an early retirement scheme, and their difference, 2012 Source: Eurostat, LFS ad hoc module 2012 4.2. Early retirement changes in EU countries The approach to early retirement in many of the European systems was similar to the solutions adopted in Montenegro. In general, early retirement was granted for people working in selected occupations (assessed as hazardous or arduous in the context of a given country) or for very long working careers (30 years or over, depending on the country). Below we present 54 the general trends in the early retirement policies in the EU. In section 4.3. we present specific solutions applied to people working in arduous and hazardous conditions that exist in the EU countries. Changes of the eligibility criteria leading to increase of retirement ages55 In recent years, we observe different policy measures applied to increase the effective retirement age. Many of these changes affect access (eligibility) for early retirement. The detailed list of changes in early retirement eligibility is provided in the Annex 5. In general, there is a tendency to reduce possibility of early retirement for very long career records. Such options for early retirements are either withdrawn (for example in Poland) or career requirements are increased. Another reform direction is to raise the early retirement threshold, reducing the gap between early and legal retirement age. Finally, in the case of selected categories of workers (i.e. those with disabilities or working in difficult conditions) conditions for early retirement are tightened by reducing the number of occupations/conditions that grant access to early retirement. Table 11: summarizes examples of recent reforms in selected EU countries that focus on increasing the age in (early) retirement systems. Table 11: Examples of retirement age changes focusing on increasing statutory and early retirement age in selected EU countries Country Changes undertaken Austria From 2014 new pension reform measures came into effect. Access to early retirement was tightened and invalidity pension scheme was modified. The early retirement scheme “Korridorpension” can still be accessed at the age of 62, but the required number of insurance years is increased to 40 years by 2017. Women’s statutory retirement age is increased from current 60 years between 2024 and 2033. The early old-age pension scheme for long term contributors “Hacklerrgelung” was tightened by increasing the relevant retirement age by two years to 57 for women and 62 for men. Deductions for early retirement were raised from 4.2% p.a. to 5.1% p.a. (for heavy worker regulation to 1.8% p.a.). The bonus for later retirement continues to amount to 4.2% p.a. Belgium Pension reform legislated in December 2011 subject to minor changes until April 30th, 2012. The minimum early retirement age and the minimum number of career years required for eligibility are gradually increased between 2013 and 2016 from 60 to 62 years and from 35 to 40 years, respectively. People with a 42-year career will still be eligible for early retirement at 60 (and at 61 with a 41-year career). In the civil servant scheme, the pension amount will take into account the earnings over the last 10 years instead of the last 5 years (not applicable to those who reached the age of 50 on January, 1st 2012). For the unemployed, the minimum career length requirement is gradually increased to 40 years. The minimum age will remain 60 years in general, and be increased to 60 years for specific cases to which a lower age presently applies. Pension entitlements for the unemployed before the age of 60 years as well as entitlements for certain periods of 55Detailed information on retirement age, special schemes as well as penalties and bonuses for early/late retirement are presented in the annex 5 55 Country Changes undertaken unemployment and certain career interruptions are reduced. The age of access to the survivor scheme was raised in 2014. Bulgaria The normal retirement age in Bulgaria will gradually rise to reach 65 years for both men and women in 2037, parliament has decided. The period of work needed to make a worker eligible for receiving full pension benefits will gradually rise by two months a year to reach 40 years for men and 37 for women in 2027. The retirement age for miners, aircraft pilots and workers in nuclear power plants e.g. first category of labor, will rise to 55 years. Currently the retirement age for men working in those sectors can is set at 52 years and 8 months, while women can retire when they reach the age of 47 years and 8 months. The retirement age for employers working in hazardous condition such as those employed in metallurgy, petrochemical industry and public transport will increase to 60 years. The retirement age for police officers and members of the military will increase to 52 years and 10 months in 2016 and will gradually rise until it reaches 55 years. Czech In 2011 the retirement age was increased above 65 years, depending on the year of birth. Republic Younger cohorts (both genders) are subject to an additional increase of 2 months. For example, persons born in 1978 the statutory retirement age is 67 years and 2 months. Denmark The retirement age increase specified in the 2006 Welfare Agreement is accelerated. The retirement age for voluntary early retirement pensions (VERP) will be increased from 60 to 62 years from 2014-2017 (formerly 2019-2022 in the Welfare Agreement), while the public old-age pension age will be increased from 65 to 67 years in 2019-2022 (as opposed to 2024-2027 before). VERP is reduced from 5 to 3 years from 2018- 2023. The basic amount for VERP is increased, while private pension wealth lowers the VERP amount to a higher degree than now. Furthermore, the system of automatic enrolment for members of the unemployment insurance scheme into the VERP is cancelled. A new senior disability pension is introduced as an administrative fast track into the disability pension for persons 5 years before the statutory retirement age. Estonia Retirement age is increased to 65 years for both males and females gradually by 2026. Greece The pension reform increases the statutory retirement age from 60 to 65. The minimum age for retirement is set at 60. Penalties apply for persons with less than full contributory career. Germany For persons born after 1946 the statutory retirement age is increased gradually from 65 to 67 years of age (to be reached for those born in 1964 and later). Early retirement for persons with minimum contributory period of 35 years will remain at 63 years of age, but the maximum penalty for early retirement, due to the increase of statutory age, will be raised from 7.2% to 14.4%. As a compensation for the longer duration of pension payments, the pension is reduced by 0.3% for each month of drawing a pension prior to the standard retirement age (in case of old-age pension for persons with severe disability before the age of 65). Spain The 2013 pension reform restricts access to early retirement by increasing the minimum age from 63 to 65 by 2027. There is also a new sustainability factor in the pension formula that links changes in the life expectancy and the amount of new retirement pension. Finland New early retirement is introduced with a minimum age of 62 and an actuarial reduction of 0.6% per month for retirement before age 63 for those born before 1952. The so called “unemployment pipeline” is 61 years of age for those born in 1957 and later 56 Country Changes undertaken France Following 2010 pension reform, the standard pension age will be increased for all pension schemes from 60 to 62 and the full pensionable age will increase from 65 to 67. Both ages increase by 4 months each year from generation born in 1951 to those born in 1955. The early retirement for long contributory careers is also increased by 2 years. Some categorizes will still be granted full pension at 65. In 2014 required number of years for full benefit is increased from 41.5 years to 43 years in the period 2020-2035. Italy Early retirement on joint age and contribution requirements was abolished. Under Notional Defined Contribution (NDC) regime, early retirement is allowed up to 3 years before standard retirement age with 20 years of contribution and amount of pension at least 1200 EUR per months. Early retirement regardless of age can be paid to women with 41 years of work and 42 years of work for men. Penalty is applied to the pension. Latvia Early retirement with a large penalty (50%) is possible for those with long contributory periods. Gradual increase of retirement age to 65 by 2025. Hungary From January 2012, early retirement schemes are gradually eliminated by either phasing out several forms of entitlements or by transformation into non-pension benefits. There is exception of women with 40 eligibility years of more. Poland Early retirement granted as "bridging pensions", outside general system. Applicable to persons working in special conditions or performing special character of work, up to 5 years prior to legal retirement age, for those that worked before January 1, 1999. For those who started their work afterwards: no special condition. Exception: miners have special system, in which they can retire even without age condition, if they have worked more than 25 years underground. Early retirement also possible in armed forces (from age 55 since 2012). From 2013 the legal retirement age started to increase by 1 month per 4 months to reach 67 for men in 2020 and for women in 2040. In 2016 the newly elected President and the government announced reversal of this change, which is discussed in the Parliament. Source: (European Commission DG ECFIN, 2015) with authors’ update As a result of retirement age changes introduced in recent years, the effective retirement age in the EU countries is projected to increase, both for men and for women, between 2014 and 2060. The average increase for men is 1.7 years and for women 2.3 years, however there are significant differences observed between countries. Projected increase in average effective retirement age for men and women by country are shown in Figure 30. It should be noted that the magnitude of the increase does not depend on the level of effective retirement age in 2014 – even countries with high retirement age plan further increases. Figure 30. Projected average effective retirement age in the EU countries: men (left panel) and women (right panel) 69 69 67 67 65 65 63 63 61 61 59 59 57 57 55 55 IE SK* MT AT CZ* EU BE ES BG PL EE SE SI RO CY* UK DE DK* NO LU HR IT* LT HU EL* PT* LV NL* FR FI IE SK* CZ* MT AT BG BE EU ES EE SE SI PL RO CY* DK* UK DE NO LU HR LT IT* HU EL* NL* PT* LV FR FI Note: * countries where statutory retirement age is legislated to increase in line with increase in life expectancy Source: (European Commission DG ECFIN, 2015) 57 Penalties for early retirement in the benefit formula Apart from the changes in early retirement through changes in the eligible age, countries also introduce financial incentives to influence retirement behavior of individuals. Countries apply penalties and bonuses in the pension calculation for those who exit the labor market earlier/later. Table 12 presents a summary of applied penalties to retire early. Penalties understood as permanent reduction of the level of benefit are applied in 14 out of 28 EU countries. In most of the countries the penalty amounts to 0.5% per each month of earlier retirement. Table 12. Incentives to postpone retirement in the EU countries Country Incentives Level of penalty Penalty Bonus Belgium x Bulgaria x Czech Republic x x 0.9% per 90 days in the 1st year, 1.2% per 90 days in the 2nd year; 1.5% per 90 days further up to the 5th year Germany x x 0.3% for each month Estonia x x 0.4% for each month Greece x 0.5% for each month Spain x x 1.875% for every quarter if involuntary termination and 2% if voluntary termination France x x 1.25% for each missing quarter Croatia x x Between 0.1% to 0.34% per month on anticipation Cyprus x 0.5% for each month Lithuania x x 0.4% for each month Hungary x Austria x x 5.1% per year Portugal x x 0.5% for each month Slovenia x x 0.3% for each month Slovakia x x 0.5% for each month Finland x x 0.4% for each month UK x Source: own analysis based on (European Commission DG ECFIN, 2015) Another solution that is used is the reduction of benefit during the receipt of the early retirement. In Latvia, half of the regular pension is paid during early retirement and the full benefit is restored when the statutory retirement age is reached. In Poland, the early bridging pension benefit is calculated based on individual account value (taking into account both NDC and Financial Defined Contribution (FDC) schemes) and life expectancy at the age of 60. In the period when bridging pensions are paid (from early to statutory retirement age), mandatory 58 pension accounts are not increased with new contributions, which leads to lower account value and future benefit level. To sum up, tightening or eliminating the use of early retirement is achieved through different measures including raising the age from which people can claim early retirement, reducing the access to early retirement to only selected workers employed in specific hazardous or arduous conditions and also through introducing financial disincentives through penalties in the pension formula. Some of the countries apply different measures at the same time, to improve the overall expected outcomes of policies. 4.3. Work in special conditions in selected countries: early retirement and prevention mechanisms. Early retirement and special pensions for workers in hazardous or arduous jobs are a special part of the pension landscape in the European countries. As underlined by (Zaidi & Whitehouse, 2009): • these special schemes are justified only for narrowly defined groups who continue to face the risk of premature mortality due to exposure to hazardous or arduous working conditions; • the continuation of these schemes owes more to institutional resistance to change rather than their usefulness as a supplementary public pension scheme; • if privileges of early retirement are to be continued for some occupations or jobs, they should be financed based on contributions by employees and employers. Early retirement due to work in special conditions provide a mechanism to compensate workers in two types of situations. Frist, working conditions in these jobs have an impact on the health of workers and the effect reduces their working careers due to disability or sickness. It can also lead to premature mortality. Second, there are jobs of the nature which workers may not be able to perform as they get older. As (Zaidi & Whitehouse, 2009) point out no generic rigorous justification of special pension schemes for workers in special conditions can easily be stated and applied across the countries. This is partly because their development is based on in the history of each country’s schemes – they came into existence as a response to what was considered to be risk-bearing occupation: these could be inherently dangerous (mining); difficult to perform in the old age (airline pilots) or even culturally protected (for example musicians or bullfighters in Spain). A horizontal definition of arduous work is proposed by (Syndex, 2014, p. 6): 59 “Occupations involving exposure of the worker over a period of time to one or several factors leading to professional situations susceptible to leave long-lasting and irreversible effects on his/her health; these factors are related to physical constraints, psychological risks, an aggressive physical environment, working organization and working rhythms, including shift work” (p. 6). This horizontal definition can be completed by the following considerations (Syndex, 2014, p. 6): • the exposure to both physical and psychosocial risk factors can negatively impact on the health and well-being of workers; • some factors are systematically considered as being the source of arduousness at work: repetitive movements, noise, carrying heavy loads, exposure to chemicals …; • sectoral social partners can agree on other factors as being sources of arduous working conditions: psychosocial risks…; • the consequences of arduous work increase with age; • there are external factors clearly linked to arduous work: o precariousness at work; o Externalization of work: outsourcing and sub-contracting trends. Given the overall direction of pension reforms, special (early) pensions for workers in arduous jobs are discussed and seen as one of the main measures adopted by the governments to tighten access to early retirement, as discussed in the previous section. There are different national approaches to policies related to workers in hazardous and arduous conditions. However, in recent years there is a significant policy shift towards prolonging working lives in all EU countries. There are three main trends in how countries are addressing the arduousness and hazardousness of work (WAHJ) (Natali, Spasova, & Vanhercke, 2016): (a) narrowing access to special schemes targeted at WAHJ by introducing stricter conditions on age and contributory periods; (b) individual assessment of work conditions and work ability for the purpose for granting pensions and other benefits; (c) redesigning specific rules and schemes with a view to increasing efficiency and sustainability. Several countries also strive to enhance the ability to work by means of health and safety programs and other innovative activation schemes (for example Belgium, Germany, Denmark, Finland, France, Norway, Sweden). It should be noted that on the European level there is the lack of systemic data collection on WAHJ. In 2016, the European Social Protection Network published summary of policies towards workers in hazardous and arduous in European countries (Natali et al., 2016), including individual country reviews56. Also, the recent work presented in (Syndex, 2014) 56 http://ec.europa.eu/social/keyDocuments.jsp?pager.offset=0&langId=en&mode=advancedSubmit&year=0&c ountry=0&type=0&advSearchKey=ESPNwahj 60 includes field research of practice in 9 European countries57 aiming at better understanding “arduous occupations” in the European pension debate. In this chapter , we summarize the results of the review for the 8 countries. Polish case is discussed in depth in the following section. These reviews indicated that there are different definitions and approaches in the EU countries. The most popular one is providing the recognition of the arduousness and hazardousness of work for the broad category of workers based on the list of conditions/occupations/sectors (22 out of 35 countries covered in the ESPN review), which is similar to the approach adopted in Montenegro. There are different approaches to define hazardous and arduous jobs. In most of the cases, the WAHJ are described through a list of strenuous physical or (in some cases) mental work conditions and/or jobs and occupations. The assessment of the ESPN roughly estimate that WAHJ represent between less than 1% and 4% of the total workforce in the European countries. This share is also decreasing in recent years, both due to downturn of sectors with WAHJ employment and revision of the lists of conditions that are recognized as WAHJ. Belgium has a concept of demanding work, which is defined mainly by the work in atypical hours (shift or night work). In Germany access to early retirement due to work conditions was successively reduced and finally abolished. In Italy, the definition includes “a psycho-physical effort particularly intense and continuous, due to factors that cannot be prevented by suitable measures”. By the reform measures introduced in 2011, the eligibility conditions for early retirement include working at least half of the working career under certain risks • extremely arduous workers; • night shifts between midnight and 5 am; • workers on selected assembly lines; • public transport drivers. In Austria, the heavy work regulation takes into account 6 criteria: • shift work and changing work hours with an extent of six hours on six working days in a month; • working under extreme heat or cold; 57Belgium, Italy, Germany, Austria, France, Denmark, Spain, Poland and Romania. For more information on these countries see Annex 6. 61 • working under chemical of physical influences which result in a reduced working capability of 10%; • men spend at least 2,000 and women 1,400 work calories during an eight-hour shift; • care of disabled or diseased persons with intensive care needs; • employees with reduced working capacity of 80% can make use of the pension for strenuous work. Since 2007 the national insurance scheme in Austria compiles list with occupations that are classified as arduous.58 The reform in 2014 introduces a requirement of rehabilitation which precedes taking up disability pension. Heavy worker regulation includes the following conditions: night shift work, exposure to excessive noise, heavy labor with 20 years and night heavy labor with 15 years. The retirement age is 57 for men and 52 for women. Only about 1% of pensioners (1,147 people) received pension for arduous work (Syndex, 2014). Additionally, in some sectors of occupation (i.e. construction work) there are sectoral solutions of transitional allowance that are pre-financed by the employers. In France, there is a coordinated approach to arduousness based on four key areas: definition, prevention, tracing the factors involved and compensation. Special work conditions are characterized by the combination of two conditions: workers’ exposure to one or more professional risk factors that are likely to have clear, irreversible effects on their health in long term, and factors linked to physical constraints, an aggressive physical environment and certain work patterns. If the work is considered as arduous, three instruments are applied: (i) individual arduousness traceability sheet, (ii) early retirement mechanism and (iii) collective agreement or action plan to prevent arduousness. Private employers as well as public employers that employ under private-law contracts are required to draw up an agreement/action plan to prevent arduousness, if they employ at least 50 people, of which at least half is exposed to one of the factors in arduousness. Agreement/action plan must concern: • reduction of multiple exposure to risk factors or the adjustment and organization of the job to limit the impact of the risk factors; • improving working conditions (in particular organization), enhancing skills and qualifications of employees, organizing the ends of workers’ careers and keeping people in work. From 2013, all private sectors workers in arduous conditions are covered by the personal account for preventing arduousness. Workers accumulate points based on their exposure to 58 For more see: https://www.sozialversicherung.at/portal27/portal/esvportal/content/contentWindow?contentid=10008.555257&acti on=b&cacheability=PAGE&version=1450691935 62 one or more arduous work factors. Workers receive one point for each quarter of exposure (two points if they are exposed to more than one factors), to a maximum of 100 points. Workers can use their points to fund training courses for reorientation to a less arduous job, maintain their salary level if they switch to part-time work or contribute to three months’ pension. In Denmark the arduous work is defined in two concepts. First, the “wear and tear” that is related to (physical or mental) gradual decrease in functional ability to a level lower than “normal” functioning for that age. Second, the working capacity, understood as ability to perform work in a satisfactory manner. If the requirements of the work are constant throughout the working life the “wear and tear” eventually reaches the critical point where the person is no longer able to do the work satisfactorily. The industries particularly threatened by the “wear and tear” are identified by the Ministry of Employment as those with highest risk of early retirement or long-term absence due to sickness. It covers a total of 18 industries59 and 38% of all employees. There are no rules establishing general early retirement due to this kind of work. The Welfare Reform has taken initiatives aimed at preventing “wear and tear” and improving working environment, particularly in the identified industries. These include establishment of the Prevention Fund, which provides support for: • initiatives that prevent physical and psychological “wear and tear” and accidents at work and occupational diseases; • initiatives that help to retain older people as well as employees with reduced working capacity in employment; • initiatives that contribute to inclusion to the labor market. In Spain, retirement age reduction coefficients may be applied on the basis of two assumptions: • occupational activities in the scales, categories, or specializations in which the work exposes to exceptional level of arduous, dangerous, unhealthy or toxic work; • occupational activities in the scales, categories, or specializations in which the work performance depends on the physical or psychological requirements that decline from certain age. The procedure envisages the following steps: 59 civil engineering, construction, demolition and completion, electronics, metal and machinery, plastic, glass and concrete, textile and paper, logistics, wood and furniture, agriculture, forestry and fisheries, slaughterhouses, nutrition and stimulants, police, emergencies and prisons, haircuts and other personal care, cleaning, passenger transport, day care centres and residential care and home care. 63 a. ground work by the National Institute for Health and Safety in the Workplace (INSHT) to produce technical papers that measure how arduous, toxic, unhealthy or dangerous an activity is on the basis of an analysis of specific indicators; b. if the report concludes that working conditions cannot be changed and application of reduction coefficients or lowering the retirement age is necessary, the cost calculation study is conducted to determine which reduction coefficients can be applied; c. the minimum retirement age is set for each activity and the relevant reduction coefficients are set. Based on these coefficients the statutory retirement age for an individual worker is reduced by application of the appropriate values. The minimum age cannot be lower than 52 years of age. In order to be eligible, the worker must prove that she/he carried out the activity that entitles for reduction coefficients. (Syndex, 2014) underlines that this procedure has not been applied as the INSHT reports are too general and the social partners cannot reach agreement to apply the new early retirement mechanisms effectively. There is no preliminary list of potentially arduous occupations. There are also selected occupational groups that have access to early retirement, which include: workers included in the mining statute, flight personnel, railway workers, artists (singers, dancers and trapeze artists), bullfighting professionals, firemen, and members of the Basque Police Force. In Romania, there is a classification of labor conditions, including special working conditions and difficult working conditions. The pension contributions differ depending on the job classification: • jobs in special working conditions: jobs where the degree of exposure to professional risk factors or to specific conditions pertaining to some categories of public services, during at least 50% of the normal working time, can lead in time to occupational diseases, to dangerous behavior in the activity, with severe consequences on occupational health and safety (these jobs include for example range of professions from the iron and steel sector and other metalworking sectors); • jobs in difficult (outstanding) working conditions: jobs where the degree of exposure to professional risk factors or to specific conditions pertaining to some categories of public services, during the entire duration of the normal working time can lead to occupational diseases, to dangerous behavior in the activity, with consequences on occupational health and safety. The inclusion of a workplace in the difficult conditions involves: • nomination of the workplaces by the employer together with the representative trade unions or workers’ Health and Safety representatives who assess the workplaces to identify the presence of occupational risks; 64 • obtaining the approval from Territorial Labor Inspectorate; • declaration to the territorial pension offices on a monthly basis of the list of all people working in difficult conditions. On August 1, 2013 a total of 1213 jobs and 32,993 workers were included in difficult working conditions jobs (0.76% of total workforce). 4.4. Police and army forces in the EU In the EU countries, the police and army officers are treated as working in conditions that enable for earlier retirement – the types of regulations depend on the country solutions. The share of both police and army personnel in all but 2 EU countries (Greece and Cyprus) is below 3% of the total employment, and in 20 countries is below 2% of the total employment.60 In Montenegro, however, it stands at 7.6%, well above the top-ranked EU countries – Greece and Cyprus (Figure 31). Even the share of police personnel in Montenegro eligible to ESP of 2% (column Montenegro-ESP) exceeds the share of total employment in police in all EU countries. In the military, the ESP-eligible personnel accounts for 0.8% of employment, which exceeds total employment in military in 13 EU countries. Figure 31. Armed forces and police personnel, % of total employed in the EU countries, 2014 Armed forces personnel, % of employed Police officers, % of employed 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Montenegro Denmark Iceland Italy Romania France Latvia Finland Norway Greece Cyprus Austria Hungary Croatia Spain Slovenia Poland Netherlands Bulgaria Germany Malta Slovakia Czech Republic Luxembourg Ireland Portugal Lithuania Belgium Estonia Switzerland Sweden Montenegro - ESP Macedonia, FYR United Kingdom Source: Authors’ calculation based on Eurostat and World Development Indicators 60 Total employment identified by the Labor Force Survey. Data for Montenegro is presented in Table 10. 65 4.5. Policies towards WAHJ There are two main trends in the end-of-career measures that are identified in the case of workers in hazardous and arduous conditions: (i) measures that facilitate early exit measures; (ii) measures prolonging working life. Grouping of countries according to the types of measures that are implemented is shown in Figure 32. As one can see, the largest group of countries combines both types of policy measures. Figure 32. End-of-career policy mix for workers in hazardous and arduous jobs Source: (Natali et al., 2016) The measures that are linked to prolonging working lives usually base on the linking of the social, labor market and health policies to support working lives. They aim at enhancing functional capacities of workers, through empowerment and rehabilitation. One of the best practices in this area is the approach in Denmark (Kvist, 2016) with three-pronged strategy: occupational health and safety focusing on prevention; rehabilitation and active labor market policy measures focusing on reinsertion into the labor market; and social protection focusing on prolonging working lives and reducing early labor market exit. Active labor market policies usually cover measures such as vocational training, counselling, job handovers or different work ability provisions. Measures that are applied include for example: • extra leave for older workers (assuming they need extra time off to remain healthy and fit for work); • possibility of reduced hours; • flexible timing of breaks at work; • exempting older workers from overtime, irregular working hours, weekend work and team work; • providing further training measures. 66 Early exit measures in most of the cases are guaranteed through separate pension rules within the general system – that is the approach similar to the one in Montenegro. Some countries allow also for partial retirement (i.e. Switzerland, Germany). In the course of the last several years (2009-2016) almost all EU countries introduced measures that tighten early exit (with exception of the Czech Republic), as discussed earlier. Some of the countries also introduced measures that support work ability. Some of the examples include: • tightening eligibility conditions and prolonging work capacity through prevention and rehabilitation measures in Sweden; • “Flex Job Reform” program with re-insertion measures in Denmark (based on the wage subsidies for employers hiring older workers with limited employability); • tripartite agreement on “An inclusive work life” in Norway (2014-2018). The most common measures used concerning IW-goal no 3 are information, shorter and more flexible working time, supplementary vacation etc., in some cases with wage compensation; • in France workers can earn points according to their exposure to different factors which can be used for vocational training, part-time work on the same pay or early retirement; • in Austria, reduction in access to early retirement is combined with rehabilitation and training programs. The measures related to tightening access include for example: • phasing out early retirement and no possibility to accumulate new eligibility in Hungary; • revision of jobs that were considered arduous in Croatia, following the increased role of automation; • reforming pensions inherited from the Soviet regime in the Baltic states. 4.6. Country case: Poland as an example of best practice reform of pensions for WAHJ As shown in section 2, the evolution of the employment rates of older workers in Poland shows a significant increase after 2008. This is a result of the package of the reform measures introduced from the beginning of 2009, consisting of: - replacement of the early retirement system inherited from the pre-reform pension system with the “bridging pensions” scheme; - introducing a set of measures for increasing labor market activities of workers aged 50 and more, the so-called “Program 50+. Solidarity of generations”. Below, we describe these two components of policy package related to extending working lives. The bridging pension scheme in Poland The concept of “bridging pensions” was marked in the initial pension reform proposal, elaborated in 1998 and 1999. At that time, Poland inherited a typical pension system with 67 wide-spread early retirement privileges. The list of occupations eligible for early retirement covered more than 300 items (1000 types of work places), there was a separate legislation with early retirement rights for: miners, railway workers, teachers, armed forces (most importantly: army, police, border guards, professional firemen, prison guards) as well as judges and prosecutors. Additionally, women with long careers could retire at age of 55 (if they have worked for 30 years). People with disabilities could also retire five years prior to official retirement age (i.e. women at age 55 and men at age 60). As a result, in the general pension system, the average age of retirement has been constant at the level of around 55 years for women and 59 years for men. In the Law on Pensions from Social Insurance Fund that introduced the NDC system in Poland, almost all pension legislation in ”civil” sector was consolidated (with exception of teachers’ pensions that sustained their regulations in the Law – Teachers’ Charter). The law envisaged that after the vacatio legis period (necessary to recognize the accrued pension rights) until the end of 2006, new bridging pensions scheme would be introduced. Due to political economy considerations, discussed below, this deadline was extended until the end of 2008. The introduction of the bridging pension scheme also resulted in the end of the possibility to retire early due to long work career record. As this change was announced in the law already in 1998, the change came into force without additional transitory requirements and its impact on increasing the actual retirement age was immediate. Main assumptions of the bridging pensions system Given the long list of various occupations with early retirement rights, it was decided that establishing the scope of the new system requires a new approach, instead of revising the existing list, trying to remove selected items. The new approach61 was based on work conditions that would establish eligibility for bridging pensions, instead of naming occupations or job places. There are two types of work that were defined62 - the work in special conditions and the work of special nature. Work in special conditions - work performed in conditions under risk factors, which with age can, with a large probability, cause a permanent health damage, performed in special conditions of work environment, determined by forces of nature or technological processes, that despite of application of available means of technical, organizational or medical prophylactic face workers with requirements that exceed their capabilities, limited due ageing 61 Initially proposed by prof. Igor Tomes, former Minister of Labour and Social Policy in the Czech Republic and World Bank consultant. One of the reforms undertaken by prof. Tomes in Czech Republic was the successful reform of early retirement scheme. 62 In the report, we refer to the final definitions adopted in the Law on Bridging Pensions in 2008. During the policy discussions, these definitions were modified, but not in the way that would affect the general assumptions of the bridging pension scheme. 68 process before reaching retirement age, to the level which makes it impossible to perform work at current workplace. Risk factors determined by the forces of nature: a) work under ground, b) work on the water, c) work under water, d) work in the air. Risk factors determined by technological processes: a) work in hot conditions of a microclimate — work performed in the premises in which the value of the thermal load index WBGT is 28°C and above, and the level of metabolism of an employee is above 130 W/m2, b) work in cold conditions of a microclimate — work performed on the premises of the air temperature below 0°C, c) very heavy physical work — work that over a shift requires an effective energy expenditure exceeding 8400 kJ in a case of men, and exceeding 4600 kJ in a case of women, d) works in conditions of elevated atmospheric pressure, e) heavy physical work associated with very high static load resulting from having to work in a forced, unchanging posture of the body; heavy physical work is defined as requiring an effective energy expenditure over a shift exceeding 6300 kJ for men and exceeding 4200 kJ for women, and works in forced posture requires a significant tilt and (or) back sprains while putting force in excess of 10 kG for men and 5 kG for women (according to the OWAS method category item 4) by at least 50% of the work shift. The work of a special nature - work requiring special responsibility and special psychophysical performance, whose ability to discharge in a manner not prejudicial to public security, including the health or life of other persons diminishes before pensionable age as a result of the deterioration of psychophysical efficiency associated with a process of individual aging. Based on these definitions, a list of specific work types in special conditions and of special nature were prepared. The list for works in special conditions consist of 40 items (work under ground in mines, work in steel factories with blast furnaces, work under water, working on sea ships, work in cold (sub-zero) temperatures, very heavy physical work) and the list of works of a special nature consist of 26 items (for example: pilots of air vessels, air traffic controllers, bus and tram drivers in public communication, railway engine drivers, medical staff working with drug-addicts, surgical teams working in emergency conditions, operators of atomic reactors). In the new approach, for each of the work types several job places can be assigned (Figure 33). 69 Figure 33. Example of transformation of list of workplaces listed in current legislation to list of wok types Work in special conditions Work of special nature Ship hulls fitter Painting, riveting and assembling pieces of equipment The driver of traction engines in public transport in very small areas with difficult ventilation (double Driver of traction engines bottoms of ships, tanks, pipes, etc.). Riveter Driver-instructor Ship painter Driver multipurpose and heavy engines for construction of the railway and railway traction network ...... Assistant of driver of traction engines Ship pipe fitter Source: (Koradecka, 2008) According to the list of conditions, defined by the law, employers reviewed their job places, in co-operation with trade unions, to establish the list of individuals and job places covered by the bridging pensions arrangements. In the case of disagreements, the decision to assign the job place was transferred to the labor inspectorate, and finally if these were not resolved, to the labor court. For each of the workplaces the employer pays the contribution of 1.5% of wage to a Bridging Pensions Fund (FEP), managed by Social Security Institution. Bridging pensions are financed from that fund, which also receives subsidies from the state budget, that are seen as financing of pre-2009 liabilities that are treated as public finance obligations. Given the early stage of development of bridging pensions, current contribution inflow covers the expenditure of the FEP. The level of contribution is not calculated to meet the actuarial balance of the system, given the scale of public liabilities for the rights accrued in the past, but its role is rather to keep employers aware of the cost of bridging pension, given their role in assessment of work places and individuals eligible for bridging pensions. On the other hand, it was important to keep the level of contributions relatively low, so that the overall tax wedge is not increased significantly, which would cause disturbances on the labor market. It was also decided that the new scheme will cover only those who worked in “old” special conditions before January 1st, 1999. All those who started work afterwards will not have a right to bridging pensions, it is expected that they will re-qualify to maintain work ability until retirement age. Thus, the bridging pensions system is transitory and, eventually, will be phased out. That means that all workers who started their employment after 1999, covered 70 by the general system (that means excluding miners, armed forces, judges and prosecutors) will not have a right to early retirement. Those who worked in conditions that prior to 1999 were eligible for early retirement (covered by list A of special conditions and list B of special character), received compensation in a form of higher initial capital on the NDC account (and thus higher pension) in the general system. As far as eligibility conditions are concerned, bridging pensions can be claimed up to 5 years before legal retirement age, by those workers, who have worked for a total of 20 years (women) or 25 years (men), including at least of 15 years of work in special conditions or of special nature. The level of bridging pension is linked to the value of individual pension account (taking into account both NDC and FDC accounts63). Bridging pensions are paid from a separate Bridging Pensions Fund, financed by employers’ contributions and state budget. Upon retirement, the beneficiary claims regular pension based on general pensions regulation; until then the individual account is not used for any pensions payment. There are also strict conditions regarding combining of receiving bridging pensions and working – it is not allowed to continue to work at the same job that was a basis to receive a bridging pension. Work of the Medical Experts Committee One of the most important premises of developing the assumptions for the bridging pension system was that the definitions of work types as well as list of working conditions for this scheme will be developed by experts – specialists in occupational medicine. In the period of preparing and adopting bridging pensions (1998-2008) there were three medical experts committees that worked on definitions and lists of work types. During the initial phase work experts agreed that early retirement should not be seen as compensation for work in harmful conditions, where defined norms are exceeded. Employers are obliged to eliminate such work conditions on the ground of international recommendations and the regulations of the Labor Code in Poland. First group of experts worked between 1998 and 2000. It was the Committee for Rights to Lower Retirement Age for People Employed in Special Conditions or Special Character. The Committee prepared a comprehensive report with the first proposal of definitions and lists of work types. Based on the data from Social Insurance Institution, they also assessed the potential coverage of the proposed system (around 200 thousand workers). The Report served as a basis for development of the bridging pensions scheme that was presented by the government and discussed with social partners until the beginning of 2001. 63Technically, for those people who are members of pension funds, the value of NDC account is artificially increased for the purpose of bridging pension calculation by amount equivalent to the accumulation resulting from FDC contribution. In that way, there are no differences in the basis for calculating bridging pensions between members of different pension funds. 71 The following government returned to the work on bridging pensions in 2005 and the Team of Experts of Occupational Medicine for verification of the list of work types in special conditions and of special nature was established. They worked for two years until 2006. Finally, the third Team of Experts of Medicine and Occupational Safety that worked in 2008 supported the finalization of the elaboration of the reform proposal. The first Committee was established by the government and comprised of experts – researchers from Universities or Research Institutes specializing in the field. In the second and third committee, members were designated by all social partners: government, trade unions and employer organizations. Reports of all three Committees were presented to the social partners who could proposed modifications that were justified by relevant medical proofs. Political economy of introducing bridging pensions The establishment of bridging pensions system took a decade, as the first proposal was formulated in 1998 and the final law was adopted in 2008. The length of time devoted to the discussion of bridging pensions arrangement was related to a significant political sensitivity of this topic. In particular, representatives of professions covered with special regulations: railway workers, teachers and miners were opposing changes, as they did not want to forego the rights that they have enjoyed. The elaboration of final proposals was also slowed down by political cycles and elections in 2001, 2005 and 2007. Due to political decisions, the armed forces (after 2001 elections) and miners (before 2005 elections) were excluded from general system and their early retirement schemes were to a large extent reinstated. In 2005 and 2006 (each time before upcoming elections) the Parliament also postponed the introduction of the envisaged bridging pensions scheme, in total by two years. What is important, not only those working in special conditions or special nature, but also women with work career exceeding 30 years could retire earlier at age 55. Additionally, in 2007 the Constitutional Tribunal in Poland decided that, following the equal rights principle, men should be given similar right from age of 60. This sentence paved the way for men covered by the old pension system (born between 1946 and 1948) to retire before the age of 65. Despite these postponements subsequent governments (in 2006-2007) continued discussions on the bridging pensions scheme. Each of the governments presented the draft law for social consultations, but did not finalize the legislative process. Only after 2007, the new majority government decided to conclude the work on the bridging pensions. During the final round of consultations, numerous meetings were organized both in a Tripartite Committee as well as by the Team of Medical Experts. Their work was reflected in the law proposal presented to the Parliament in mid-2008. Redefinition of criteria for early 72 retirement was also supported by another sentence from Constitutional Tribunal that indicated that due to changing working conditions and technological development, there is a need to revise the list of occupations for early retirement formed in early 1980s. The social debate on bridging pensions was also conducted, aiming to explain the need for the change, due to the high costs generated by the system. A dedicated web page was also designed and launched to facilitate the information dissemination as well as implementation of the new scheme from 2009. PR activities related to the bridging pensions helped to reduce the societal pressure to further sustain early retirement. In 2012, after the Parliamentary elections, the Government followed the path established by the bridging pensions and proposed to raise and equalize retirement ages of men and women. This change that came in force from 2013 means that retirement age is raised by one month every four months for both men and women until it reaches 67 (which will happen in 2020 for men and 2040 for women). Additionally, a minimum retirement age of 55 was introduced for the armed forces, while judges and prosecutors after 2017 will be retiring at age of 67. However, it should be noted that newly elected government in 2015 announced reversal of the increase in the statutory retirement age and return to the initial 60/65. Program “Solidarity of Generations. Program 50+” The work on prolonging working lives in Poland was a two-pronged strategy. The limitation of early retirement in the new bridging pension system was also accompanied by the comprehensive program aimed at promoting activity of older workers, called “Solidar ity of Generations. Program 50+”. The program followed the concept of developing virtuous circle of activation and prolonging working lives through integrated measures. Based on the available national and international evidence, the Program included a range of recommendations for labor market policy related to the following objectives: 1. Improvement of work conditions, promotion of employment of workers above age 50 and age management; 2. Improvement of competences and qualifications of workers 50+; 3. Reducing the labor cost related to employment of workers 50+; 4. Activation of unemployed and at risk of job loss aged 50 and over; 5. Labor market integration of people with disabilities; 6. Increasing opportunities for female employment through development of care services facilitating reconciliation of work and family responsibilities. Following the program recommendations, several legislative changes were made, reducing the cost of labor, including reduction of contribution to Labor Fund (financing labor market policy) as well as reducing the cost of extended sick leave for employers through shifting the financing of part of sick leave to the social insurance system. A number of activation measures were developed and financed by the Labor Fund also programs funded by the European Social Fund. 73 The new version of the “50+ Program” was adopted at the end of 2013, following its mid-term revision. The revision reinforced the overall goal of increasing employment rate of people in age group 55-64 to 50%. The program includes the following objectives: 1. Adjustment of skills and raising qualifications of people 45+, in line with labor market requirements; 2. 50+ friendly organization culture and work environment; 3. Improving efficiency of activities promoting longer working lives; 4. Promoting active and healthy ageing; 5. Developing co-operation for employment of people 50+ 6. Social transfers stimulating activity of people 50+ Impact of changes on early retirement incidence The introduction of the bridging pensions helped to raise the employment rates of older workers, that happened despite the economic crisis in Europe in 2008 and following years. It should be underlined that Poland maintained positive economic growth, which helped to maintain the focus on activation of workers 50+. The outcome of the change is also seen in the pension system statistics. First, the inflow to pension system of new retirees reduced and the average retirement age increased, particularly for women (Figure 34). In 2015, the higher inflow was due to the fact, that first people retiring in the new system reached retirement age – as a result, the average retirement age also increased for both men and women. Figure 34. Inflow to the old-age pension system by age and gender in Poland (in thousand) MEN WOMEN 200 64 200 62 63 180 61 62 160 60 150 140 59 61 120 60 58 100 100 59 57 80 58 60 56 50 57 55 40 56 20 54 0 55 0 53 2004 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 M 65 and older M 60-64 F 60 and older M 55-59 F 55-59 M 50-54 F 50-54 M below 50 F below 50 average retirement age M average retirement age F Source: own calculations based on ZUS data 74 At the same time, the overall number of people receiving retirement transfers: old-age, pre- retirement benefits and allowances and bridging pensions reduced. In 2004 first limitations to access early retirement through pre-retirement benefits and allowances were introduced, as a reaction to the growing number of pre-retirement transfers that peaked in that year exceeding 1,6 million people. This change resulted in a gradual decline of early retirement transfers that accelerated after 2008 when bridging pensions were implemented. As a result, in 2011 the number of people receiving benefits before retirement age fell to the level that was not seen for the past 15 years and keeps falling further (Figure 35). The total number of old-age pensioners, after two decades of increases, stabilized at the level of around 5 million beneficiaries, which given the population ageing is a positive development. (Figure 36). Between the peak in 2008 and 2014 the number of pensions paid below retirement age dropped by two thirds (from 1.27 million to 0.47 million) and the average number of bridging pensions paid in 2015 was 13.7 thousand, just a little fraction of the observed decline in early retirement payments. By the same token, the employment rate in the group 55-64 increased from 26.1 in 2004 to 44.3% in 2015, which is one of the most dynamic increases in the EU countries. Figure 35. Transfers below retirement age and employment Figure 36. Number of old-age pensioners in Poland (in rate of older workers in Poland thousand) 2,000 50.0 6,000 40.0 5,000 1,500 4,000 30.0 1,000 3,000 20.0 2,000 500 10.0 1,000 0 0.0 - 2011 1997 1999 2001 2003 2005 2007 2009 2013 2015 1994 2010 1990 1992 1996 1998 2000 2002 2004 2006 2008 2012 2014 bridging pensions old-age pensions below retirement age pre-retirement benefits pre-retirement allowances employment rate 55-64 Source: own calculations based on ZUS, Source: ZUS Eurostat Concluding, the Polish experience can be seen as an example of efficient policy intervention. This was a combination of series of factors, such as: • Co-operation with medical experts and use of evidence in reform proposal; • Integrated approach combining measures in pension policy and employment policy; • Maintaining dialogue with social partners; • Comprehensive approach limiting all potential routes to early retirement. 75 5. Conclusions and recommendations for reforming early retirement system for special and hazardous occupations in Montenegro Montenegro faces significant challenges in the labor market and pension system. Employment levels are low, particularly among workers in age group 50 and over. There is a need for coordinated policy aiming at both improving employment rate in this age group as well as increasing actual retirement age. It should be noted that several up-to-date reform efforts went in a good direction. Some harmonization of pension legislation allows introducing measures that apply to all workers simultaneously. It also allows creating a unified database of workers employed in arduous occupations that is necessary for the implementation of policies aimed at this group. This allows for easy development of the registry of individuals with early retirement through extended service. Regulation of workplaces and jobs, i.e. grades of accelerated service period through the secondary legislation enables easier changes and reviews in these areas, in the frequency enabled by the law (every five years) as well as design the appropriate financing structure. However, there are still 5 legal acts that regulate early retirement and 2 amending regulations in this area. Based on the assessment presented in this report, there are several policy measures that are recommended. Limiting early retirement due to long service and revision of other early retirement routes The general early retirement due to the long service should be abolished . Long service pensions have been removed from pension systems in most of the EU countries. The example of Poland clearly indicates that such policy change can be beneficial both from the labor market (an increase of employment rate) and pension system (an increase of actual retirement age) perspectives. Prevention and rehabilitation measures should be strengthened as “early warning” solutions avoiding expensive deactivation of older workers. Additionall y, we proposed to examine whether the insured disabled persons should be covered by the same law as all other persons being that the main intention of the law is to work as a ‘preventive measure’ against the loss of working ability. Possibilities to retire early through other benefit programs should be examined and limited. In all jobs (including miners) the early retirement age should be clearly set, not higher than 5 years below standard retirement age. This means that the early retirement age should be introduced also in the case of miners, who should be covered by the general early retirement regulations, similarly to other professions in difficult conditions. It is recommended that the pension system remains universal, covering all types of workers, which is beneficial for the mobility of the labor force. 76 Revision of the list of occupations covered by early retirement scheme Second, the list of occupations that give a right for early retirement should be further reviewed and narrowed. As shown in the EU countries experiences, the share of workers eligible for early retirement should be limited below 2% of the workforce, preferably around 1% (excluding the army and the police). Montenegro employs exceptionally high number of military and police personnel. Furthermore, 95% of employed in the police (internal affairs) are eligible to ESP. It needs to be analyzed and reviewed which jobs and positions in the police are hazardous and arduous and the list revised accordingly. The ESP eligibility issue in the military is less acute due to revision implemented in 2009. However, with still high employment in military, the list of jobs eligible to ESP would also need to be further addressed. The types of work eligible for extended service period should be redefined, limiting them to such categories that require provisions due to the risk of health damage or due to responsibility for safety of other people. While the current definition of early retirement already refers to the lack of possibility to remove hazardous condition, the definitions should be updated, taking into account the current technological progress. Following the example of Poland, this work should be conducted in co-operation with occupational medicine experts (internal and, if necessary, international). Defining types of work, instead of occupations is also recommended, to avoid revisions and updating related to constantly changing lists of occupations. This would also mean revising the tasks or job content at certain workplaces, i.e. revision of the early retirement for all military personnel. The work types covered by the extended period could include: work in special conditions, work of special nature, work related to public safety (designated for armed forces such as police or military)64. The new list should go along with: • general changes in the economy, • technological development, • general regulations concerning safety at work. As a rule, early retirement should be granted only in case where the work conditions cannot be changed and improved through any prophylactic measure (technological, organizational and medial). Application of these criteria could reduce early retirement for some occupations. 64 As it is done for example in Poland, Romania or Italy. 77 Furthermore, the minimum required length of period that gives a right to extended pension should be also reviewed by the medial experts, to take into account the maximum potential exposure to specific work conditions that can lead to health detriment. Based on the developed list, employers, in co-operation with trade unions or employees’ representations should identify workers in defined work places that would create a registry of workers in special conditions for the purposes of both preventive and compensatory measures. Transparent financing of early retirement The current financing of early retirement for special and hazardous jobs should be modified, to increase its transparency. Currently, supplementary contribution paid by employers is merged with general old-age contribution. As a result, the supplementary contribution finances both the early retirement payment and the part of the old-age pension paid from regular retirement age. We recommend separating the early retirement due to employment in special or hazardous jobs from general pension system and creating separate scheme that would be used for financing of early retirement (Figure 37). The level of supplementary contributions should be calculated at the level necessary to finance the payment of benefit from earlier retirement age to the legal retirement age. In order to finance a transfer equivalent to around 40% of pervious wage for 5 years, the contribution rate should reach around 6% of wage (assuming wage growth and rate of return on contribution account equal to 2% annually and 35 years of accumulation). The early retirement part should be financially separated, but it should be administered by the current social security administration (PIO). Figure 37. Employment, early retirement and regular retirement in the proposed system Early retirement due to special or hazardous jobs Employment and wage Old-age pension income life course Source: authors 78 To increase transparency of financing of pensions for special and hazardous jobs and prepare regular assessment of the cost of early retirement. Level of additional contributions should be calculated to cover the actuarially assessed cost of the extended time of benefit payment before the legal retirement age is reached. The goal should be to reduce the level of tax wedge, which reduces the labor demand and increases the level of informal economy. Additionally, most of the hazardous jobs that created future beneficiaries entitled to ESP (metal processing industry) are actually vanishing along with the change of the economic structure. In Montenegro, we are seeing less and less of any entrepreneurial and business ideas in processing industries due to their overall market conditions – high national labor costs combined with competition from the cheaper Chinese and East-Asian markets. That means that the scheme may require some tax financing, resulting from the higher cost of the current benefits which are not matched with contributions coming from reduced number of jobs in ESP. Another option for compensating for the difficult working conditions and risky workplaces would be to transfer the burden from the state to the employer who would provide the compensation through the higher salary. Increase of the annual retirement decrement should be considered as well as of the supplementary contribution rates. Increase of the latter should be adjusted to the specific degrees of acceleration to enable sufficient replacement rate for persons who are eligible for early retirement. Alternatively, if the supplementary contribution rates would remain unchanged then the retirement period should be appropriately increased. Individual prevention measures applied to workers in special and hazardous jobs Third, for workers employed in the special and hazardous jobs, the coordinated policy mix should be introduced, including prevention measures applied during the working period as well as compensation in the form of early retirement pension. Following the French example it is recommended that workers in arduous conditions are covered by the personal account for preventing arduousness. Workers should accumulate points based on their exposure to one or more arduous work factors. Workers receive one point for each quarter of exposure (two points if they are exposed to more than one factors), to a maximum of 100 points. Workers could use their points to fund training courses for reorientation to a less arduous job, maintain their salary level if they switch to part-time work. Other recommended accompanying measures include: - Developing a training and re-qualifications scheme for older workers, focused on improving the skills level and adjusting it to the current needs of the labor market, such scheme should allow participants to gain new qualifications or refresh the existing ones; 79 - Promoting age management development among enterprises, focused on changing the stereotypes of employers related to employment of older workers and developing work organization measures supporting longer working lives; - Improvement of overall work conditions and work quality level, that would help to reduce inflow to early retirement and disability pensions; - Introducing flexible worktime measures for older workers as well as possibility to have additional leave to support the rehabilitation and prevention of losing workg ability; - Developing a government ALMP program supporting re-employment of older workers, following the examples of Scandinavia or Poland. - Seeking ways to reduce the labor costs of older workers (like already mentioned revision of the contribution level for extended service). Labor market policy and labor market regulations should also support longer working lives. While the existing rules of combining pensions and work are conducive to maintain formal employment of working pensioners, it is important to look for solutions that stimulate longer work and reducing factors that push older workers towards early retirement and economic inactivity. Develop public information activities Finally, the reform activities should be accompanied by public information campaign that would explain the need to reduce early retirement and promote longer working lives. Such campaign should involve co-operation with social partners in broad-range of activities focusing on changing the existing stereotypes and approaches. Such activities could be based on the best national and international experiences. The World Bank future support to such campaign could bring necessary resources and technical support in the designing and conducting the campaign. The public information should be aimed at employers and social partners, presenting the benefits from extending working lives. Given the current situation in Montenegro, the timing of the reform implementation is crucial. Thus, preparatory activities should be initiated relatively quickly. This requires developing of an integrated action plan, including the list of all necessary measures as well as clear division of tasks. 80 Preparatory work, such as designing the terms of reference for the medial experts and establishment of medical experts; team should be initiated as soon as possible, as such a revision, together with consultation with social partners will take some time, judging from the Polish experience (not less than 6 moths of actual work). Before the legislative changes are proposed, the consensus-building activities should also be conducted, including wide consultations of reform activities, given the long-term impact of the proposed changes. 81 References Börsch-Supan, A. 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Pensions at a Glance 2013: OECD and G20 Indicators. Riedel, M., & Hofer, H. (2013). Determinants of the Transition form Work into Retirement. NEUJOBS Working Paper. Syndex. (2014). Better Understanding of “ Arduous Occupations ” within the European Pension Debate, (July). World Bank. (2011). Does the labor Law Contribute to Poor Employment Outcomes in Montenegro? Technical Note (March). 82 World Bank. (2012). How Can the Pension System Contribute to Better Employment Outcomes in Montenegro? Technical Note (June). World Bank. (2015). Pension System in Montenegro : Outlook and Further Reform Options, (June). Zaidi, A., & Whitehouse, E. R. (2009). Should Pension Systems Recognise “Hazardous and Arduous Work”?, (91). http://doi.org/10.1787/221835736557 83 Annex 1. Main legislative provisions concerning the extended service period system in Montenegro: 1. Law on Pension and Disability Insurance („Official Gazette of Montenegro, No. 54/2003, 39/2004, 79/2004, 81/2004, 47/2007, and „Official Gazette of Montenegro“, No. 79/2008, 14/2010, 78/2010, 34/2011, 66/2012, 38/2013, 61/2013, 6/2014, 60/2014-I, 60/2014-II and 10/2015. Some changes to the Law were made by the Constitutional Court of Montenegro and through the adoption of the Law on unified registration and reporting system on the calculation and collection of taxes and contributions („Official Gazette of Republic of Montenegro“, No. 29/05). 2. Regulation on determining the workplaces, i.e. jobs in the state administration to which insurance period is calculated with an increased duration („Official Gazette of Montenegro“, No. 80/10 and 36/14). 3. the Law on use of units of the Army of Montenegro in the international forces and the participation of Civil Guard, police and employees of the public administration in peacekeeping missions and other activities abroad („Official Gazette of Montenegro“, No. 61/08). 4. the Regulation on determination of the workplaces and occupations for which the insurance service is calculated at an accelerated rate and the procedure and method for their determination, issued by the Ministry of Labor and Social Welfare. 5. Rulebook on identification of jobs or tasks within the state administration entitled to EPS (September 2014); 6. Decree on identification of tasks or jobs for which professional military personnel are entitled to EPS (Official Gazette of Montenegro no. 35/09 and 36/14) 7. The Law on Social Insurance Contributions („Official Gazette of Montenegro“, No. 78/10, 14/12, and 62/13). 8. The Law on Nacional Security Agency („Official Gazette of Montenegro“, No. 28/05, 86/09, 20/11 and 08/15). 9. The Law on Internal Affairs („Official Gazette of Montenegro“, No. 44/12, 36/13 and 1/15). 10. The Law on Social and Child Protection („Official Gazette of Montenegro“, No. 27/13, 1/15, 42/15, 47/15, 56/16, 66/16 and 1/17) 84 Annex 2: List of conditions for retirement, generally referred to as “more favorable conditions” More favorable conditions refer to: 1. Article 197b, paragraph 1, of the PDI Law: 50 years of age and 20 years of service, of which at least 10 years of ESP; employees of police, employees working in the prison, Agency for national security and military (opportunity for retirement was available from January 1, 2009 to December 31, 2012); 2. Article 197b, paragraph 3, of the PDI Law: 50 years of age and 20 years of ESP, but not currently working on jobs entitled to ESP (opportunity for retirement was available from January 1, 2009 to December 31, 2012); 3. Article 17, paragraph 3, of the PDI Law: 30 years of service, of which at least 20 years of ESP (miners); 4. Article 17a, of the PDI Law: 62 years of age and 15 years of service, early retirement; 5. Article 197 z, of the PDI Law: 30 years of service of which at least 20 years of ESP (opportunity for retirement was available from July 7, 2011 to December 31, 2011); 6. Article 197 i, of the PDI Law: At least 20 years of service - parents of the children with invalidity (special needs); 7. Article 197 j, of the PDI Law; 30 years of service in aluminum industry regardless of years of age, retired due to the bankruptcy (opportunity for retirement was available from August 10, 2013 to September 30, 2013); 8. Article 197 k, of the PDI Law: 30 years of service, if the employment was terminated in the processing industry due to the bankruptcy, and if in that process the severance payment was not paid (opportunity for retirement was available from January 8, 2015 to March 15, 2015); 9. Article 197 l of the PDI Law: Employee whose employment was terminated due to the bankruptcy in the company co-owned by the state, if the employee had 30 years of service (male), i.e. 25 years of service (female). Opportunity for retirement was available from March 18, 2015 to July 1, 2015. 10. Article 109 b of the Law on Internal Affairs: Employment termination by April 1, 2015 if the insured person by January 31, 2015 had 40 years of age and 20 years of service, of which at least 10 years effectively spent on jobs with ESP (opportunity for retirement was available from January 13, 2015 to July 1, 2015); 11. Article 52b of the Law on the Agency for State Security: Employee of the State Security Agency who by April 30, 2015 turned 50 years of age and 25 years of service, of which at least 15 years effectively spent n jobs with ESP, and whose employment terminated at latest on May 1, 2015 (opportunity for retirement was available from March 7, 2015 to July 1, 2015); 12. Article 52c of the Law on the Agency for State Security; Employee of the State Security Agency, who terminated employment on his/her own request by May 1, 2015, in the case that by April 30, 2015 the employee turned 50 years of age and 20 years of service, of which at least 10 years effectively spent on jobs with ESP (opportunity for retirement was available from March 7, 2015 to July 1, 2015); 85 Annex 3. Lists of exceptions to regular retirement age Table 1: Exceptions to the old-age retirement, introduced in 2010 Year Article 197dj: in exception to Article Article 198a: in exception to Article 17, 17, Paragraph 1 (stipulating that a Paragraph 2 (stipulating that a person may person becomes eligible to the old- become eligible to the old-age pension age pension when: 1) she/he turns 67 after reaching 40 years of service), years of age and 15 years of service), women becomes entitled to an old-age person becomes entitled to an old- pension when in the certain calendar year age pension when in the certain she turns: 2010 calendar year he/she 65 years (men) turns: or 60 years (women) 2011 65 years (men) or 60 years (women) 2012 65 years (men) or 60 years (women) 2013 65 years (men) or 60 years (women) 55 years of age and 35 years of insurance 2014 65 years and two months (men) and 55 years and three months of age and 60 years and three months (women); 35 years and three months of insurance 2015 65 years and four months (men), and 55 years and six months of age and 60 years and six months (women) 35 years and six months of insurance 2016 65 years and six months (men) and 55 years and nine months of age and 60 years and nine months (women) 35 years and nine months of insurance 2017 65 years and eight months (men) and 56 years of age and 36 years of insurance 61 years (women) 2018 65 years and ten months (men), and 56 years and three months of age and 61 years and three months (women) 36 years and three months of insurance 2019 66 years of age (men) and 56 years and six months of age and 61 years and six months (women) 36 years and six months of insurance 2020 66 years and two months (men) and 56 years and nine months of age and 61 years and nine months (women) 36 years and nine months of insurance 2021 66 years and four months of age 57 years of age and 37 years of insurance (men) and 62 years (women) 2022 66 years and six months (men) and 57 years of age and three months and 62 years and three months (women) 37 years and three months of insurance 2023 66 years and eight months (men) and 57 years of age and six months and 62 years and six months (women) 37 years and six months of insurance 2024 66 years and ten months (men) and 57 years of age and nine months and 62 years and nine months (women) 37 years and nine months of insurance 2025 63 years (women) 58 years of age and 38 years of insurance 2026 63 years and three months (women) 58 years and three months of age and 38 years and three months of insurance 2027 63 years and six months (women) 58 years and six months of age and 38 years and six months of insurance 2028 63 years and nine months (women) 58 years of age and nine months and 38 years and nine months of insurance 2029 64 years (women) 59 years of age and 39 years of insurance 2030 64 years and three months (women) 59 years and three months of age and 39 years and three months of insurance 2031 64 years and six months (women) 59 years and six months of age and 39 years and six months of insurance 2032 64 years and nine months (women) 59 years and nine months of age and 39 years and nine months of insurance 2033 65 years (women) 2034 65 years and three months (women) 2035 65 years and six months (women) 2036 65 years and nine months (women) 2037 66 years (women) 2038 66 years and three months (women) 2039 66 years and six months (women) 2040 66 years and nine months (women) 86 Source: The Law on Pension and Disability Insurance Table 2: Exceptional application of the decrement for men and women, introduced in 2010 Year Article 197ž, for men (in exception Article 197e, for women (in to Article 27a) for each month of exception to Article 27a) for each earlier retirement, before the month of earlier retirement, before statutory retirement age, the statutory retirement age, decrement of 0.35% will be decrement of 0.35% will be applied applied for each month before for each month before turning turning specific age in specific specific age in specific calendar 2011 calendar ageas follows: year, 64 years of year, as follows: 2012 64 years and six months of age 2013 65 years of age 2014 65 years and two months of age 2015 65 years and four months of age 2016 65 years and six months of age 2017 65 years and eight months of age 2018 65 years and ten months of age 2019 66 years of age 2020 66 years and two months of age 2021 66 years and four months of age 2022 66 years and six months of age 62 years and three months of age 2023 66 years and eight months of age 62 years and six months of age 2024 66 years and ten months of age 62 years and nine months of age 2025 63 years of age 2026 63 years and three months of age 2027 63 years and six months of age 2028 63 years and nine months of age 2029 64 years of age 2030 64 years and three months of age 2031 64 years and six months of age 2032 64 years and nine months of age of age 2033 65 years of age 2034 65 years and three months of age 2035 65 years and six months of age 2036 65 years and nine months of age 2037 66 years of age 2038 66 years and three months of age 2039 66 years and six months of age 2040 66 years and nine months of age Source: The Law on Pension and Disability Insurance 87 Annex 4. A list of eligible occupations and work places entitled to accelerated service period Degree of accelerated Section Title service period MINES 1 Pit mining 1.1. Coal Mines 1 12 // 14 Specifier, helper, engineer and technician engaged in direct production (geological, surveying, occupational safety, mechanical and electrical). 2 12 // 15 Pump operator, pit signalers, pit superintendent, warehouseman of cave tools, warehouseman of explosives, loader of rechargeable batteries, manager (of the pit, pit transport, mechanical and electrical maintenance in the pit), engineers and technicians dealing with matters of direct production, rescue squad. 3 12 // 16 The operator of mining machines - devices, cable car and winch operator in the pit, pit plotter, pit border guard, pouring crane operator, rechargeable locomotive driver, escort train driver, worker in charge of pit track maintenance, pit janitor, blacksmith, electrician and lubrication engineer of pit machinery, transport foreman, shift supervisor and district forest supervisor. 4 12 // 18 Job titles: Coal digger - foreman of the construction site, coal digger, assistant digger, blaster, pit driver, combine operator, pit mason, pit carpenter, wide forehead brigadier, driller, drilling assistant and a laborer engaged in deep drilling. 1.2. Mines of non-ferrous metals and non-metals 5 12 // 14 The manager of the pit, foreman, supervisor and foreman engaged in the maintenance of pumps, compressors, piping, and fittings; engineer and technician engaged in direct production (geological, surveying, safety at work, mechanical, electrical, construction). 88 Degree of accelerated Section Title service period 6 12 // 15 Pump operator, signaler, worker engaged in the export facility, loader of rechargeable batteries, operator of explosives warehouse, operator of compressor stations, water gates and his assistant, worker engaged in the maintenance of compressors, pumps, hoists, pipelines and fittings (blacksmith, electrician, mechanic, welder, lubrication engineer), the manager (of pit, transport), supervisor and his deputy, the foreman (investment projects, export, mining machines, maintenance of mining equipment, the underground rooms), engineer and technician in the production (mining). 7 12 // 16 Worker dealing with the transport of ore and backfill in the pit, blaster and ore sampler (in preparatory and research works), janitor in the pit, worker engaged in maintenance of mining machines in the pit (blacksmith, electrician, mechanic, welder, lubrication engineer), supervisor and deputy supervisor (ore mining and transportation). 8 12 // 18 Foreman, miner and his assistant, blaster (drilling mine pits, mining, placement of support, handling of mining machinery, manual and mechanized loading and ancillary activities in the pit), driller and assistant drillers (deep drilling in the pit), rubble handler, bricklayer and carpenter, and their assistants (to support placement dug, bars shafts and other facilities), crusher, assistant crusher on primary crushing of ore in the pit. 2 Opencast mining 2.1. Bauxite Mines 9 12 // 14 Employees at the loading bay, autogenous and electrical welder and their foremen in the mine, blacksmith, lubrication engineer, tire repairman and manual worker (in opencast mining and stone separation), assistant worker in separation and operator of mining construction machines in the mine. 10 12 // 15 Blaster foreman, dumper driver, dredger operator in opencast mining, driller and assistant driller. 89 Degree of accelerated Section Title service period 2.2 Lignite mines 11 12 // 14 Jobs of employees who work directly in opencast mining: operator of a cyclic dredger (with a rotating gate of discharge conveyors of a bucket wheel dredge, reloading conveyor of excavator trays, drive station of belt conveyor, loading - reloading of the excavator and crusher. 12 12 // 14 Jobs of employees who work directly in opencast mining: operator of a bulldozer and a self- propelled crane (pipe layer) 13 12 // 14 Jobs of employees who work directly in opencast mining: assistant worker dealing with continuous-track bulldozers, conveyor belt systems and preparatory works. 14 12 // 14 Jobs of employees who work directly in opencast mining dealing with maintenance of excavators and conveyor belts: blacksmith, welder, tire repairman dealing with preventive maintenance (service group). 15 12 // 14 Jobs of employees who work directly in opencast mining dealing with maintenance of auxiliary machinery and preparatory works: welders in charge of preventive maintenance (service group). 16 12 // 14 Jobs of employees who directly work as assistants to operators of electrical bulldozer, sorting operators, pneumatic hammers on the receiving hoppers, assistant workers in receiving hoppers and workers employed on a dispenser. 17 12 // 15 Jobs of employees who work directly in opencast mining: operator of a continuous-track dredger (bucket - ladder) and dump truck operators. 2.3 Processing of lignite Separation of the landfill 90 Degree of accelerated Section Title service period 18 12 // 14 The operator of feeder 102. bulldozer driver in the shift and electrical and autogenous welder. 19 12 // 14 The operator in charge of wagon opening and the conveyor belt operator in positions 460; 459 VS and PS; 464 and 463; 412; 133 VS and PS; 103; 113; 115; 119; 114; 120; 122; 125; and PS 126; 3; 620; 2; 617; 102nd 20 12 // 15 The foreman of the crusher and the auxiliary worker in the crusher. Drying/Dewatering Plant 21 12 // 14 Job titles: autoclave loader, operator of the autoclave discharge, autoclave discharge helper, operator of thermal controls, conveyor operator I / ri 7 / r, conveyor operator 3 / ri 5 / r; operator in charge of raw coal delivery at level 31.5 m of the drying unit I and II and the conveyor operator towards the separation bunker, equipment operator of dry coal at level "0" drying plant I and II; conveyor operator 1 / s - 1 and I / s - II and supply bunkers, conveyor operator 4 / c - 2, conveyor operator in a screening plant at a height of 5 m, operator dealing with bunker discharge of drying plants I and II at level "0" m; operator of PETT dusting, foreman in charge of the technological process of he drying plant and mechanical maintenance, blacksmith in charge of maintenance and welder. 22 12 // 15 Job titles: binder operator screen and bringing the dried coal; operator caliber sieve and ribbons. Energy and Chemistry 23 12 // 14 The operator of raw coal feeder, laborer in charge of conveyor belts, worker engaged in pumps for oil, tar and gas; foreman of the bunker; worker in charge of the bunker and foreman in charge of delivery and dispatch. 91 Degree of accelerated Section Title service period 24 12 // 15 The operator of dry coal feeder, mill operator at level "0", operator of boiler slag removal. 25 12 // 16 Boiler stoker 2.4. Production of lime and stone 26 12 // 14 Miner, worker in charge of stone dispenser in the crusher plant and his assistant, operator of a lime grinding plant, operator of a lime hydration plant, worker in charge of lime discharge, worker on the grid, driver in charge of internal transport of lime, worker employed in lime loading and coal unloading. 27 12 // 15 Stonecutters, lime baking sheet and his assistant on coal furnaces. II Geological mining research 28 12 // 14 Punch driller. 29 12 // 15 Injection and torque driller. III BLACK METALLURGY - IRONWORKS 1 Agglomeration 30 12 // 14 The operator of tumbler wagon, raw material stacker and receiving hopper and his assistant, helper in charge of reception and unloading of raw materials, assistant operator of the collector and operator of four-roller and hammer crushers. 31 12 // 14 Expert in charge of component dosage, primary mixtures, assistant to component dosage expert, operator of the primary mixer, the secondary mixer, scraper devices, sieve for sorting of sinter, drum for cooling of return fines and a line refrigerator, support worker in charge of the conveyor for receiving the return fine, dosage, return mixture, sintering and second sintering operator. 2 Blast Furnaces 92 Degree of accelerated Section Title service period 32 12 // 15 Support worker in charge of iron production, crane driver engaged in casting furnaces and slag granulation, refractory bricklayer and his assistant. 33 12 // 16 Jobs in the smelter to produce iron - blower and cooling system operator. 3 Converter steelworks 34 12 // 14 Utility worker in charge of drying raw materials, filling bunkers, replacing glass, autogenous cutter engaged in preparation, steel casting steel and refractory construction. 35 12 // 14 Operator of steel casting, cooling, gas cutting and devices for handover of slabs, workers engaged in marking, treatment and cutting of slabs, operator of a casting and console crane of continuous casts and driver of half-portal cranes in the slab processing plant. 36 12 // 14 Operator of the overcast, employed in the homogenization of iron, potter, desulphurization and argoning operator, assistant in charge of out-of-the-furnace processing, utility worker in charge of preparing the unit for argoning and driver of filling cartridge crane and cartridge machine. 37 12 // 15 Foreman, founder and auxiliary staff involved in continuous casting, blower and convector operator, mixer, assistant mixer and mixer crane operator crane and workers in charge of drawing slag from the pots. 4 Organization of production and maintenance of technological equipment 38 12 // 14 Shift foreman and the foreman in charge of agglomeration, blast furnaces and converter steelworks 39 12 // 14 Foreman, worker and his assistant engaged in preventive ongoing and shift maintenance (blacksmith, machine blacksmith, blacksmith-fitter, electrician, welder, tire repairman, sandblaster) except in workshops. 5 SM steelworks and steelworks maintenance 93 Degree of accelerated Section Title service period 40 12 // 15 Blowers in steel mills and steel foundries working directly on melting and punching full time. 41 12 // 15 Workers engaged in casting steel in casting pits 42 12 // 15 Workers engaged in mechanical and electrical maintenance of units in ironworks. 6 Rolling Mill 43 12 // 14 Autogenous welder and ancillary jobs. 44 12 // 15 Workers in the rolling mill where the work is done with hand tools while hot (feeding and acceptance, extraction, separation, turning and cleaning of rolling mill products). 45 12 // 15 Workers engaged in annealing and heat treatment furnaces with continuous production process where the work is performed with hand tools (pusher and suppressor, furnace and ancillary operators, roll binder). 7 Galvanizing Plant 46 12 // 14 Employee who directly works in galvanizing and pickling wires, pipes and sheets. 8 Aluminum production 47 12 // 14 Jobs of employees dealing with the treatment of metal in a furnace in the foundry of primary aluminum: charging the furnace, refining and alloying metals, overflow of liquid metal, cleaning the walls and floor furnaces and cleaning the area around the furnace. 48 12 // 14 Jobs of employees who work in semi-continuous and continuous casting of aluminum and its alloys: removing slag from metal, preparation and installation of casting equipment and casting, extraction and removal of molten pieces. 94 Degree of accelerated Section Title service period 49 12 // 14 Jobs of employees engaged in processing marinite: burning marinite, mounting tools on devices and production of elements made of marinite. 50 12 // 14 Jobs of employees engaged in the production of anodes: the manager (chief, shift, and unit), chief technologist, crane operator in charge of the anode furnace, operator of the anode sealing device, operator of loading machines and other vehicles. 51 12 // 14 Jobs of employees who work directly in the production of aluminum: chief foreman of production, leading foreman in a shift, startup foreman, shift foreman, production technologist, chief technologist in the plant, technician in charge of cell repair, worker engaged in measuring voltage drops, driver of a forklift, cleaning utility vehicle and transporter vehicle. 52 12 // 14 Jobs of employees who are directly involved in the maintenance of work equipment in the anodes, electrolysis and foundry: foreman of electrical and mechanical maintenance (chief, shift and unit), foreman (of mechanical maintenance, compressor maintenance), compressor blacksmith, blacksmith, lathe operator, gas and electro-welder, power and shift electrician and forklift driver. 53 12 // 14 Jobs of employees working directly in the production of alumina: foreman of the production process; jobs in electrical and mechanical maintenance (except measurement and regulation maintenance), jobs in dry cleaning of the plant. 54 12 // 16 Jobs of employees who work directly in the preparation of raw materials and manufacturing of raw anodes: unloading, storage, sampling and dispatch; in charge of the tower for petroleum coke mass, resins and anode waste, control of operating parameters for the mass and pressing of the raw anodes and maintaining cleanliness in the tower. 95 Degree of accelerated Section Title service period 55 12 // 16 Jobs of employees who work directly in the production of anode: furnace worker in charge of the induction furnace, furnace worker in charge of the anode furnace and welder of bars and claws. 56 12 // 16 Jobs of employees who work directly in the production of aluminum: worker in charge of placement of cells for startup and a worker in charge of preparing the pot and pipes. 57 12 // 18 Jobs of employees who work directly in the placement of electrolytic cells: breaking the electrolytic crust and alumina dosing, correction of electrolyte composition, pumping liquid metal, replacement of anodes and anode frame raising, sampling of metals and electrolytes and cleaning the work area around electrolytic cells (worker in charge of placement of cells for startup, support worker and sampler). IV FOUNDRY 58 12 // 14 Job titles: ongoing work in molding (hand and machine), and not working in preparation etc. Melter in charge of the casting furnace in the continuous casting process, worker dealing with the cleaning of moulds operating with hand and stable grinding machines and sand-casting, removing castings from the moulds by handheld and vibratory grids, the removal of the core with handheld pneumatic tools, production of sand cores, feeding, batching and maintenance of furnaces for melting cast iron, steel and non-ferrous metals, as well as preparing the pots for casting, cargo handling exclusively in halls of the foundry and maintenance of cleaners, foundry units, smelting and other aggregates exclusively in the halls of the foundry (not in the workshops), foreman involved in direct work in a foundry. 59 12 // 15 Job titles: worker engaged in casting cleaning working on overhead and grinders and worker in the cabin involved in sandblasting of castings, preparation and processing of sand and casting into moulds and plates (centrifugal and gravitational pressure). 96 Degree of accelerated Section Title service period V SMITHY 60 12 // 14 Job titles: Cleaning forgings-pressings with fire whetstone; driver of bridge cranes within the facilities of the smithy; heat treatment of forgings and blacksmith pressing tools with flow, chamber, pit and ion furnaces. 61 12 // 15 Job titles: hammering of forgings with hammers having the piston weight of 1500 N and higher; heating of material with gas, liquid and solid fuel or electric current; removal of scratches through a cold or semi-hot procedure from forgings-shavings; hammering and calibration of forgings on large-scale presses with force pressure from 6.3 to 40 MN and special machines; hammering the forgings on horizontal forging machines with the pressure force of 15 MN; hammering forgings- pressings on friction presses of 2000 tons; free hammering of forgings weighing up to 2500 N; forging and pressing on hydraulic presses with a pressure forces of up to 25 MN. VI REFRACTORY BRICKLAYER 62 12 // 15 Job titles: refractory bricklayer and assistant refractory bricklayer in fireproof maintenance in hot furnace plants in ferrous and non-ferrous metallurgy, foundries, smithies, burning and melting of non-metallic ores in rotary furnaces. VII FORESTRY 63 12 // 14 Job title: driver of a motor vehicle in forestry (extraction and transport of wood varieties to the point of loading). 12 // 15 Job title: Timber cutter. VIII DEFENCE-RELATED PRODUCTION OF EXPLOSIVES AND EXPLOSIVE MATERIALS 1 Production, processing and finishing of explosives, fireworks and pyrotechnic mixtures 64 12 // 14 Jobs of employees working directly in packaging, marking, manipulation and internal transport of finished products. 97 Degree of accelerated Section Title service period 65 12 // 15 Jobs of employees who work directly in the production of trinitrotoluene: manipulation of raw materials, processing of acids, drying, granulation, in-site transport of trinitrotoluene, preparation and processing of solvents. 66 12 // 15 Jobs of employees working directly on processing trinitrotoluene: fragmentation, transport, handling, melting, casting, crystallization, pouring, cooling, drilled blind, tempering and balancing of explosives. 67 12 // 15 Jobs of employees working directly on the development of retardant mixtures. 68 12 // 15 Jobs of employees who work directly in the production of commercial explosives: homogenization on the mill machine and crusher, preparing for cartridging, filling of funnels, hand and machine cartridging, explosive packing, handling the plant and a vehicle for ANFO explosives. 69 12 // 16 Jobs of employees who work directly in the production of high explosives: synthesis, nitration, stabilization, pre-crystallization, coating, filtration, granulation, drying, grinding, sifting and making solvents. 70 12 // 16 Jobs of employees who work directly in the production of high explosives: preparation, melting, pouring, winding, pressing, machining on a lathe, milling and drilling. 71 12 // 16 Jobs of employees working directly on the surface treatment and polishing of high explosives. 72 12 // 16 Jobs of employees who work directly in the production of mercury fulminate and initial mixtures: preparation of raw materials, production and drying. 73 12 // 16 Jobs of employees who work directly in the production of pyrotechnic mixtures: preparation of raw materials and production. 74 12 // 16 Jobs of employees who work directly in the production of fuses: drying and dosing of PETN, spinning, coating, ringing and packaging. 2 Refinement and dismantling 98 Degree of accelerated Section Title service period 75 12 // 15 Jobs of employees who work directly in: preparation, installation and dismantling, setting, interim control of positions, subassemblies, assemblies and end products, manual and machine work with an open "V" material, storage and manipulation of "V" material. 76 12 // 15 Jobs of employees working directly on: installation, measurement and setting of electrical elements, the development and application of chemical materials, cataloging and coloring, packaging, handling and internal transport of end products. 3 Research, development and improvement of production of explosives, explosive pyrotechnic mixtures, gunpowder, fireworks and pyrotechnic devices 77 12 // 14 Jobs of employees who work directly in the production, processing and finishing of initial and high explosives, gun powder, nitrocellulose, fireworks and pyrotechnic mixtures, special-purpose substances and materials and pyrotechnic mixtures and elaboration of ordnance: activities of development and construction. 4 Quality control 78 12 // 14 Jobs of employees who are directly involved in testing explosives and ordnance on the training ground: reception worker, electrician, gunsmith, employee dealing with tempering and sampling. 79 12 // 15 Jobs of employees working directly at the test site for testing weapons: artillery gunner, person serving at the training ground, firing operator, artillery master, deminer and conductor of circuits. 80 12 // 16 Jobs of employees who work directly in the cabin for testing firearm performance, accuracy and precision (scorer, assistant scorer and operator). 81 12 // 16 Jobs of employees who are directly involved in the destruction of warheads and related materials (operator and assistant). 99 Degree of accelerated Section Title service period 5 Maintenance 82 12 // 14 Jobs of employees who are directly involved in the maintenance of technological equipment, blacksmith and fitter. 6 Organization and Coordination 83 12 // 14 Jobs of employees who work directly in the production and processing of nitrocellulose, nitroglycerin, spherical powders of strong mixture, pressing of high explosives, elaboration of position, subassemblies and assemblies of ordnance: managers and foremen. 84 12 // 14 Jobs of employees who work directly in the production, processing and finishing of explosives, fireworks and pyrotechnic mixtures, gunpowder, nitrocellulose, strong mixtures, elaboration of warheads and pyrotechnic devices: the implementation and monitoring of the technological process (technicians and assistants). 85 12 // 15 Jobs of employees who work directly in the production, processing and finishing of explosives, black and low-smoke gunpowder fuses: managers and foremen. IX NAVAL SHIPBUILDING 86 12 // 14 Jobs of employees who work on determining and connecting metal ship elements with pneumatic tools. 87 12 // 14 Jobs of employees who work on the development, installation and testing of pipelines, boilers and refrigeration systems on ships (naval pipemen and naval boilermakers). 88 12 // 14 Jobs of employees who work in gas cutting and levelling of naval elements (gas welders). 89 12 // 14 Jobs of employees engaged in insulation of naval elements (naval insulators). 90 12 // 14 Jobs of employees engaged in coating of naval elements (naval painters). 100 Degree of accelerated Section Title service period 91 12 // 14 Jobs of employees who work directly as: naval blacksmiths-tinsmiths, naval mechanics, engine and naval electricians in the ship's hull. 92 12 // 15 Jobs of employees who work on the assembly of elements into sections and the assembly of sections to construct hulls (naval fitters). 93 12 // 15 Jobs of employees who work on erecting the scaffolding on ships (naval scaffolder). 94 12 // 15 Jobs of employees who work as electric welders in the ship's hull. 95 12 // 15 Jobs of employees engaged in removal of the rust, and rough painting in the ship's hull. X TRAFFIC 1 Air Transport 96 12 // 16 Job titles: Pilot-radio operator, navigator and aircraft mechanic, provided they have performed at least 200 flights per year. 97 12 // 18 Job titles: flight attendant or aircraft host provided, provided they have performed at least 200 flights per year. 98 12 // 18 Job titles: professional pilot, provided they have performed at least 200 flights per year, instructor of engine-powered flights and sky-gliding, provided they have performed at least 200 flights per year, skydiving instructor, provided they have undertaken at least 30 jumps per year. 2 Air Traffic Control 99 12 // 16 Job titles: air traffic operator engaged in terminal, district, airport and access air traffic control, coordinator instructor, shift manager and assistant air traffic controller. 101 Degree of accelerated Section Title service period 3 Maritime Transport 100 12 // 15 Job titles: long-voyage crew members, provided they were aboard a ship at least six months a year. 4 Harbor Transport 101 12 // 14 Job title: harbor-transport worker who is directly and physically (manually and without mechanical tools) involved in transshipment of goods in harbors. 5 Railway Traffic 102 12 // 14 Job titles: train dispatcher in stations of groups I and II, assistant engine driver, maneuver operator and carriage controller, remote-control dispatcher, electrical mechanic and operator in charge of contact network maintenance. 103 12 // 15 Job titles: shunter and engine drivers involved in maneuvers. 104 12 // 16 Job title: drivers of electric and diesel-powered locomotives 6 Road Traffic 105 12 // 14 Job title: Driver of a heavy-duty vehicle of seven or more tons. 106 12 // 14 Urban, suburban and interurban traffic XI CONSTRUCTION AND MAINTENANCE OF POWER TRANSMISSION LINES 1 Construction 107 12 // 14 Job titles: fitter engaged in primary works in construction of 110 kV and higher power lines, fitter and his assistant involved in construction of overhead power lines up to 35 kV and tasks of bundling power lines of 35 and 110 kV voltage and higher. 108 12 // 15 Job title: fitter engaged in construction of overhead power transmission lines of 110 kV and higher. 102 Degree of accelerated Section Title service period 2 Maintenance 109 12 // 14 Job title: maintenance of overhead power facilities up to 110 kV and higher, except for public lighting. XII CONSTRUCTION 110 12 // 14 Jobs of employees directly involved in tunnel digging (punchers, blasters and mine igniter, loaders and their support workers). 111 12 // 14 Job title: operator of a "Franki" piling system. XIII PRINTING INDUSTRY 112 12 // 14 Job title: galvanizer of intaglio printing. 113 12 // 14 Job title: employee who works directly with rotary machines for printing newspapers, journals, magazines, various reproduction items and packaging - high rotary, flex- and flat printing (foreman, worker and support worker). 114 12 // 15 Job title: employee who works directly with rotary machines for printing newspapers, journals, magazines, various reproduction items and packaging - intaglio printing (foreman, worker and assistant worker). XIV LEATHER PROCESSING INDUCTRY 115 12 // 14 Job titles: hide coating and wool pulling, machine washing of small hides and leather used to make fur, soaking and leaching in barrels and semi-barrels, splitting and manual processing of pelt, bating of pelt and cowhide, preparation of colors and chemicals in galleries, neutralization and tanning of leather, dyeing and greasing of leather, in barrels and semi-barrels for de-liming, pickling, de-pickling and tanning of leather in vacuum and pesting device, machine spraying and stretching of leather. 103 Degree of accelerated Section Title service period 116 12 // 15 Jobs: removal entrails of meat and fat. XV TEXTILE INDUSTRY 117 12 // 14 Job titles: Dyer of all types of textile materials and wool washer 118 12 // 15 Job: search and splitting of textile raw materials. XVI PHARMACEUTICAL INDUSTRY 119 12 // 14 Job titles: producer and assistant producer of hormones, antibiotics and enzymes (except packaging). 120 12 // 14 Job titles: producer and assistant producer in the extraction and fermentation. 121 12 // 14 Job titles: manufacturer of dry suspension, ampoule filling operator, dosing expert in sterile environments. XVII ELECTRICITY GENERATION 1 Thermal Power Plants 122 12 // 14 Job titles: operator in charge of the crusher, on-site transportation of coal and excavator station and his assistant bulldozer operator. 123 12 // 14 Jobs: unit operator and his assistant, operator of electrical plant and on-duty electrician in the unit, machinist of turbine and boiler plant, auxiliary worker in the boiler room and a firefighter in the fire brigade. 123 12 // 14 Jobs: maintenance of boiler plant, dredge stations and conveyor belts (mechanic - blacksmith, welder and their support staff). 2 Hydroelectric Power Plants 125 12 // 14 Jobs in exploitation units: shift leader, power plant foreman, fitter, shift electrician and machinist of the aggregates. 104 Degree of accelerated Section Title service period XVIII MEAT PROCESSING INDUSTRY 126 12 // 14 Jobs: treatment of abdominal organs and the processing of entrails. XIX WORKING IN LOW TEMPERATURES 127 12 // 14 Job titles: forklift operator and a laborer in the refrigerated tunnels and chambers. XX WORKING UNDER WATER 128 12 // 18 Job titles: deep water diving and working in caissons. XXI UTILITY SERVICES 1 Professional firefighters in fire brigades 129 12 // 14 Job title: professional firefighter on operational duty in a fire squad established by municipal assemblies. 2 Water supply 130 12 // 14 Job titles: stamping of drains and regeneration of water wells (auxiliary worker and welder), employed in maintenance of the water supply network (plumber, blacksmith and welder) and workers employed in cleaning and disinfection of reservoirs and sedimentation tanks in filter installations of the water supply network. 3 Sewerage 131 12 // 15 Jobs: cleaning septic tanks, workers employed in maintaining the sewage network - closed system (sewage worker) and cleaning the grates in the sedimentation tank of the pumping station (ancillary worker). 4 Chimney Sweeping Services 132 12 // 14 Position: Chimney sweeper. 105 Degree of accelerated Section Title service period 5 Funeral Services 133 12 // 14 Job title: Undertaker. XXII HEALTH INSTITUTIONS 1 Radiology Area 134 12 // 15 Jobs of employees who are directly involved in preparing and implementing closed gamma-ray emission devices: specialist doctor- radiotherapist, radiological technician in radiotherapy, radio therapeutic or radiological physicist, worker in charge of protection against ionizing radiation. XXIII EMERGENCY MEDICAL ASSISTANCE 135 12 // 14 Job titles: technician (nurse) who aids in the provision of emergency medical help, or provides specific immediate medical care to patients who have suddenly been taken ill, to patients hurt or injured in situ and during transport and emergency vehicle driver who drives the special ambulance vehicle for patients who have suddenly been taken ill, for the injured and the hurt. 136 12 // 15 Job title: doctor who provides emergency medical aid to the ill, injured and hurt in situ and during transport. XXIV ASSEMBLY OF TECHNOLOGICAL EQUIPMENT IN POWER ENGINEERING CHEMICAL INDUSTRY 137 12 // 14 Job titles: fitter and welder. XXV ARTISTIC ACTIVITY 138 12 // 15 Job titles: opera singer - soloist playing major roles, dancer of folk dances employed full-time in professional ensembles. 139 12 // 18 Job title: ballet dancer. 106 Degree of accelerated Section Title service period Disabled persons 140 12 // 15 Persons who have a physical disability of at least 70%; veterans of groups I to VI; civil war invalids of groups I to VI; blind persons, persons suffering from muscular dystrophy or muscular and neuromuscular diseases, paraplegia and cerebral palsy and multiple sclerosis. MINISTRY OF INTERNAL AFFAIRS 1 The Directorate for Emergency Situations a) The Directorate of Operations: 12 // 16 Jobs related to protection from unexploded ordnance. b) The Directorate for Airline Helicopter Unit: 12 // 16 Jobs related to safe course of air traffic for proper needs and training of staff in accordance with regulations governing air transport; organization and operation of units for firefighting in the air; assisting in the elimination of consequences of emergency situations; transportation of the sick or injured; conducting search and rescue activities from the air; training and practice for pilots. 2 The Department for Internal Control of the Police: 107 Degree of accelerated Section Title service period 12 // 16 Jobs of taking operational measures and activities in order to detect and suppress all forms of unlawful behavior and conduct of police officers (especially criminal acts of corruption of police officers, criminal offenses against the rights and freedoms of man and citizen) and other crimes that are prosecuted per official duty; implementation of ordinary and emergency control of the legality of work of organizational police units; control of legality of police powers; proposing measures to remove the causes of illegal and unprofessional actions, conduct and behavior of police officers; monitoring the status of internal discipline and professional ethics; supervision of counterintelligence protection of the police and of police officers by applying preventive security measures, actions and means. 3 Police Directorate: a) In the sector of General Jurisdiction: 12 // 16 In the Department of Public Peace and Order (PPO): operative, instructive, and other activities in the field of PPO; monitoring the state of PPO and undertaking preventive and operational measures to combat and detect violations of PPO, as well as of criminal acts and their perpetrators; undertaking organizational measures to maintain the PPO in public meetings; supervision, control, and providing technical assistance to the Police Station in charge of railway safety. 12 // 16 The department of road safety: operations in taking preventive, operative and repressive measures on the implementation of regulations and the creation of conditions for safe traffic; operations of control and regulation of traffic, as well as organizing and providing accompaniment during the movement and residence of protected persons and delegations in Montenegro. b) The Criminal Investigations Department: 108 Degree of accelerated Section Title service period 12 // 16 The Department for Fighting Ordinary Crime: jobs in tracking down and arresting perpetrators of criminal acts of ordinary crime; taking measures and actions to prevent the perpetration of ordinary crimes; monitoring, improvement of working methods regarding the efficiency of detection of ordinary crimes; direct involvement in handling the most complex cases with elements of ordinary crime. 12 // 16 The Department for Fighting Organized Crime and Corruption: jobs in monitoring and analyzing the situation and trends of organized crime; monitoring and analysis of international crime groups linked to perpetrators of criminal activity - citizens of Montenegro; pinpointing centers of organized crime; identifying, monitoring and studying organized crime; the implementation of operational activities in relation to groups and individuals; direct participation The process of identification of profit gained by the perpetration of crime and its seizure. 12 // 16 The Department for Fighting Drugs and Smuggling: jobs in tracking down and arresting offenders The area of drug abuse, analytical monitoring and research on the state of crime in this area; work related to the control of drug abuse in terms of the so-called "street" dealing and trafficking of illegal drugs. 12 // 16 The Department of Special Checks: operations of collecting data and information in the area of crime; assessment of proposals and implementation of secret surveillance measures (surveillance of telecommunications, observation and documentation, audio and video surveillance) in accordance with applicable legislation; undertaking, implementation and planned organization of covert operative and tactical measures and actions towards persons of security interest and facilities regarding which the police had established certain types of operational activities. 109 Degree of accelerated Section Title service period 12 // 16 In the Witness Protection Unit: witness protection in accordance with the provisions of the Law on Witness Protection; implementation of emergency protection measures in accordance with the Protection Program. 12 // 16 Undercover Investigation Unit (P1): jobs of undertaking secret surveillance measures - engagement of undercover investigators and collaborators in accordance with the Criminal Procedure Code, the Law on Internal Affairs and other applicable laws; collecting information useful for security while concealing the purpose of data collection and the undercover mission of a police officer; providing evidence for the initiation and conduct of criminal proceedings; selection, training, filing and engagement of undercover agents from the units of specially trained officers and performing other tasks within the scope of work of the Unit. 110 Degree of accelerated Section Title service period 12 // 16 The Department for International Police Cooperation INTERPOL-EUROPOL-SELEC: work related to: international police cooperation, as well as National Central Bureau of Interpol (NCB Interpol), the National Bureau of Europol (NB Europol); as a national contact point for cooperation with the SELEC Centre and other international law enforcement agencies involved in combating crime; direct exchange of information with the police and judicial authorities of other countries and the implementation of activities related to the prevention and detection of crimes and their perpetrators, the search for the perpetrators aimed at bringing them down to the judicial authorities in order to conduct legal proceedings or execute criminal sanctions; coordinating international police cooperation on a multilateral basis, that is achieved through the participation of police The work of international organizations and institutions, as well as projects related to international police cooperation; implementation of the International Police and judicial cooperation in accordance with the commitments undertaken when joining the Interpol, Europol, SELEC, Frontex, and other international police organizations, and in accordance with bilateral and multilateral international agreements and ratified conventions and protocols. c) Border Police Department: 111 Degree of accelerated Section Title service period 12 // 16 Tasks of ensuring the inviolability of state borders; protection of life and health; detecting and preventing the perpetration of crimes and violations and deprivation of liberty of their perpetrators; preventing illegal migration; control of persons, means of transport and objects deep inside the territory to prevent illegal entry and stay in Montenegro and prevent cross-border crime, where there are security reasons at stake; detection and prevention of crimes, offenses and tracking down and catching the perpetrators in the territorial waters of Montenegro; search and rescue of people, vessels and goods; multi-sensor surveillance of the sea border; multi-sensor observation of the local waters; sensor identification of facilities of interest to security; passenger surveillance; security area of border crossing; providing cross-border area; security and control of cellular platforms; control of movement and residence of all categories of foreigners; surveillance of certain activities of foreigners; surveillance of foreigners with special status; surveillance of permanent categories of foreigners; direct monitoring and studying of the issues of movement and residence of foreigners and proposing appropriate measures; combating illegal migration, where there is no element of organization. d) Department of Personal and Public Safety: 12 // 16 Jobs related to the security of individuals who are subject to protective measures on the basis of their job title, residence and positions in detention and motion, in accordance with the regulations of the Government of Montenegro; providing protection for foreign persons subject to security measures; organizing the work of the anti-terrorist protection and electronic-technical protection; protection of government administration buildings, facilities in which the persons requiring protective measures live and work in accordance with regulations of the Government of Montenegro or under an order and evaluation by the Police and the National Security Agency; providing security measures for diplomatic and consular missions in Montenegro. e) Special Anti-Terrorist Unit: 112 Degree of accelerated Section Title service period 12 // 16 Jobs related to combating the most complex forms of terrorist activities; providing assistance to the criminal police and other organizational units of the police during arrest of perpetrators, especially in situations where it is expected to use firearms; resolving hostage situations and instances of barricading of facilities and arresting offenders involved in them; arresting criminals and gang members; resolving situations created by using firearms in urban and rural environments; assisting in fighting organized crime; protecting individuals and facilities threatened by a direct act of terrorism; cooperation and providing assistance to foreign anti-terrorist units; participation in the rescue of persons and property in cases of natural and other disasters (nuclear, chemical and biological disasters, traffic accidents). f) Special Police Unit: 12 // 16 Jobs related to combating all types of terrorism and organized crime; reinstitution of PPO on a larger scale; securing public meetings and events with the highest level of security risk; securing the facilities of special importance for the state, as well as in cases of high security risk of possible attacks on them; assisting other organizational police units in performing certain complex tasks and duties; supporting state institutions in eliminating consequences of natural disasters and other disasters, so-called rescue missions; participation in the military, police and other missions in crisis areas. g) Forensic Center: 12 // 16 Activities of a center manager; activities performed by the Group for sampling during fires and explosions and the Group for coordinating crime scene investigation, standardization of equipment and surveillance. h) Security Centers: 113 Degree of accelerated Section Title service period 12 // 16 Police operations in the territory of the local government, the Capital City and the Royal Capital, which relate to the protection of life, personal and property safety; prevention and detection of crimes and finding and detention of their perpetrators; preservation of PPO and road traffic safety; control of movement and residence of foreigners. 2 GENERAL SECRETARIAT OF THE GOVERNMENT OF MONTENEGRO: a) Air Service: 12 // 16 Jobs related to the use and use of aircraft. 3 National Security Agency: 12 // 16 The tasks performed by the director, managers and employees who implement the "National Security" program, employees involved in the "Administration ” program, engaged in collection, processing, protected access or use of classified information of relevance to national security of Montenegro. 4 MINISTRY OF JUSTICE: 1) The Institute for Execution of Criminal Sanctions: a) Correctional Facility of Podgorica: 12 // 16 Jobs related to security of inmates, maintaining internal order and other measures necessary for the proper conduct of life of convicted individuals at the Facility, personality testing, implementation of the resocialization program, implementation of labor and occupational therapy of inmates, workshop production, agricultural and livestock production and maintenance of equipment and facilities of the Facility; training of convicted persons for specific jobs. b) Remand Prison of Podgorica: 114 Degree of accelerated Section Title service period 12 // 16 The work of securing the presence of the suspect, the defendant and the accused in criminal proceedings - detention, conduct of prisoners outside the prison by court order or other appropriate authorities. c) Short-term Sentence Prison of Podgorica: 12 // 16 Jobs related to serving a prison sentence of up to six months for males pronounced in criminal proceedings and imprisonment pronounced in misdemeanor proceedings, personality tests of convicted and punished persons and implementation of established re-socialization program. d) The Prison of Bijelo Polje: 12 // 16 The job of securing the presence of the accused in criminal proceedings - detention, imprisonment of up to six months pronounced in criminal proceedings and imprisonment pronounced in misdemeanor proceedings for males, the conduct of inmates outside the prison by order of a court or other authorized bodies. e) Healthcare Authority: 12 // 16 Jobs in providing healthcare to inmates, on primary and secondary levels in clinics and dispensaries. 5 MINISTRY OF DEFENCE: 1) The Department of Military Intelligence and Security Affairs: 12 // 16 Military intelligence, counter-intelligence and security affairs. 12 // 16 Intelligence affairs and military police affairs. THE ARMY OF MONTENEGRO 12 // 14 Professional military personnel which are not included in the previous job groups. 115 Degree of accelerated Section Title service period 12 // 15 Professional military personnel which are not included in the previous job groups and are on duty or they work in the units of the Army of Montenegro. 12 // 16 Intelligence affairs and affairs of the military police in the Army units and the General Staff. 12 // 16 The jobs of electronic surveillance in the units for electronic reconnaissance and all jobs crypto- protection in units of the Army of Montenegro and the General Staff of the Army of Montenegro. 12 // 18 The job of a pilot, flyer or parachutist; 2) duties of a maritime saboteur in a maritime squadron; 3) duties in the company of special forces; 4) duties of deep-water divers; 5) duties in the decompression chamber or hyperbaric chamber. 12 // 24 Military personnel in peacekeeping missions 116 Annex 5. Retirement age, special schemes, penalties and bonuses in pension formula in the EU countries Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement Belgium Minimum retirement age and contributory Special schemes - Miners (except - New version of the pension years - 62 with 40 years of contribution as from for miners with less than 20 career bonus as at 1/1/2014: the 2016 (exceptions: 60 - 42 and 61 - 41). years as at 31 December 2011, who pension bonus starts one year Transition period: 60.5 - 38 in 2013; 61 - 39 in are subject to general conditions), after the worker complies with 2014; 61.5 - 40 in 2015. Statutory retirement civil aviation flying personnel the requirements for early age - 65 years (65 in 2060). Contributory period (except for the -55 as at 31 retirement. The pension bonus is for full pension - 45 years. December 2011, who are subject to a lump-sum amount for each general conditions), seamen, additional day effectively worked, journalists: lower statutory increasing with the number of retirement age, shorter additional working days (from 1.5 contributory period for full pension. EUR by day during the first 12 months till 2.5 EUR by day after 60 months). The specific age pension supplement granted to civil servants is replaced by the pension bonus as at 1/1/2014: see wage earner pension scheme. Bulgaria Minimum retirement age and contributory Special schemes - Exceptions from Teachers: Penalties for Teachers: Bonuses for postponing years - Men: age of 63 and 8months with at the general rule: military and police early retirement - 0.1% for retirement – Upon attainment of least 37 years and 8 months of contributions; officers can retire regardless of every month of early the statutory retirement age Women: age of 60 and 8 months with at least their age with completed 27 retirement without taking advantage from 34 years and 8 months contributions or 65 contribution years. early retirement - 0.33% for every years and 8 months for both genders and at Special scheme - Exceptions from insurance month after meeting least 15 years of actual contributions. the general rules: 1) entire the requirements for early Retirement age linked to life expectancy - not contribution for civil servants, retirement. legislated. Statutory retirement age - For 2013 military and police officers is paid and 2014: Men: 63 years and 8 months; by the state; 2) the state pays Women: 60 years and 8 months. As of 1 additional 23% contribution for January 2015, the statutory retirement age will military and police officers be raised by four months each calendar year to Hazardous jobs: reach 65 for men and 63 for women. II labor category: Minimum retirement age and contributory 117 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement Contributory period for full pension - 37 years years - Men: age of 57 and 8 and 8 months for men; 34 years and 8 months months with at least 15 for women. contribution years and 100 age plus service points, Women: age of 52 and 8 months with at least 15 contribution years and 94 age plus service points. I labor category: Minimum retirement age and contributory years - Men: age of 52 and 8 months with at least 10 contribution years and 100 age plus service points; Women: age of 47 and 8 months with at least 10 contribution years and 94 age plus service points. Teachers: Minimum retirement age and contributory years - Men: age of 60 and 8 months with at least 30 years and 8 months contributions; Women: age of 57 and 8 months with at least 25 years and 8 months contributions. Czech Minimum retirement age and contributory Penalties for early Bonuses for postponing Republic years - Minimum retirement age: 5 years retirement - 0,9% per 90 retirement - 1,5% per 90 days (no before statutory age but not earlier than at age days in the 1st year; 1,2% pension drawn); 1,5% per 180 60 Contributory period: min. 29 years, or 19 per 90 days in the 2nd year; days (half of the pension drawn); years at age 5 years higher than statutory (in 1,5% per 90 days further up 0,4% per 360 days (full pension 2013) Retirement age linked to life expectancy - to the 5th year. drawn). not specific rule (retirement age postponement is set with respect to life expectancy) Statutory retirement age - men: 62 years and 8 months. Women: No child: 61 years and 8months 1 child: 60 years and 8 months 2 children: 59 years and 8 months 3 and 4: 58 years and 8 118 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement months 5 and more: 57 years and 8 months (in 2013) Denmark Minimum retirement age and contributory Voluntary early retirement pension: It is possible to postpone years – 65 n/a Retirement age linked to life Minimum retirement age and retirement with up to 10 years expectancy – legislated. Statutory retirement contributory years – 60 years and 5 and thereby increase the old age age - 65 (2014), Discretionary increase in months - 30 years of contribution pension. The additional benefit is retirement age from 65 in 2018 to 67 years in Retirement age linked to life calculated as the period 2022, indexed to life expectancy from 2030, expectancy - Legislated Statutory postponed relative to the 72,5 (2060). retirement age - 60 years and 5 expected lifetime at the months (2014), Discretionary postponed retirement age, Civil servants: Minimum retirement age and increase in retirement age from 60 multiplied by the regular old age contributory years - 60-n/a years in 2013 to 64 years in 2023 pension. The additional benefit is (implies that VERP period is added until death. shortened from 5 to 3 years), indexed to life expectancy from 2027, 69 years and 5 months (2060) Germany Minimum retirement age and contributory 0.3% for each month 0.5% for each month years - 63 years with 35 years of pension relevant contribution Retirement age linked to life expectancy - Statutory retirement age will raise gradually to 67 in 2029 Statutory Estonia Minimum retirement age and contributory -0.4% for each month +0.9% for each month years - Statutory minus 3 years, minimum 15 years of contribution Retirement age linked to life expectancy – Not legislated Statutory retirement age - Men 63 Women 61 (2016 - both 63: 2026- both 65) Contributory period for full pension - minimum contributory period -15 years Ireland Minimum retirement age and contributory years - Age 66. Minimum contribution years =10 (rate will vary on record) Retirement age linked to life expectancy - Not as such, although increases planned to anticipate such increase in 119 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement LE Statutory retirement age - No statutory retirement age, pension age is 66 (was 65 until January 2014) Greece Minimum retirement age and contributory 1/200 per month years - 62+ for 40 contributory years Retirement age linked to life expectancy - Legislated Statutory retirement age - 67+ Contributory period for full pension - 40 years (at least 15 years at the statutory retirement age) Special schemes - Hazardous Occupation: Statutory Retirement Age 62+ Spain Minimum retirement age and contributory 1.875% for every quarter 2% for careers up to 25 years ; years - Immediate 2 year increase for early before statutory age if 2.75% for careers between 25 retirement 2013. Reduction coefficients apply. involuntary termination (2% and 37 years ; 4% for careers 63 age for early retirement and 33 years if voluntary) for above 37 years minimum contribution 61 in limited cases of contributory period 44.5 economic crisis. “Pension reform Law 27/2011, years August 1st” Statutory retirement age - Increase in the statutory age from 65 to 67 years from 2013 till 2027. 65 still possible with 38.5 years of contribution. “Pension reform Law 27/2011, August 1st”. France Minimum retirement age and contributory 1.25% for each missing 1.25% for each additional quarter years - 62, no requirement on contributory quarter years. Retirement age linked to life expectancy - No Statutory retirement age - 67 Croatia Minimum retirement age and contributory Additional contributions are paid by Permanent reduction of the Increase of 0.15% for each month years - 65/15 Retirement age linked to life employers for employees in amount of old-age pension of deferment. Maximum 9% expectancy - Not Applicable Statutory arduous and unhealthy occupations as of 1 January 2014 varies increase for maximum 5 years of retirement age - The pensionable age in 2013: (listed in special legislation), from between 0.10% to 0.34% deferment. Bonus is awarded Men: 65 years; Women: 60 years and 9 4.86% to 17.58% of the payroll to per month of anticipation only for beneficiaries with 35 or months. The pensionable age for women is provide for the extension of depending on the total more years of qualifying period being gradually increased by 3 months every insurance periods where 12 months duration of completed completed. 120 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement year from 1 January 2011 onwards, upon of career is calculated as 14-18 insurance periods, ranging reaching 65 in 2030. As of 2038 the months of the insurance period from 35 to 40 years of pensionable age (women and men) will be 67 insurance (from 31 to 38 after finishing a transitional period starting years for women in 2014, 2031, by rising age gradually 3 months per which will gradually calendar year. increase to 35-40 years by 2030). No reduction of the amount of early pension in case of persons age 60 with 41 year of contribution (women and men), and the same for persons unemployed for at least 2 years before completing the early pension requirements due to enterprise bankruptcy Italy Minimum retirement age and contributory Percentages implicitly Percentages implicitly imposed years - Contribution requirements regardless of imposed by actuarial by actuarial equivalence (3-4% age, in 2014: 42 years and 6 months for men; equivalence (3-4% per year) per year) from the age of 57 to 41 years and 6 months for women. from the age of 57 to the the age of 70 Contribution requirements are indexed to age of 70. changes in life expectancy. The newly insured after 1995 are also allowed to retire earlier than SRA, up to a maximum of three years, as long as they have matured 20 years of contributions and a pension not inferior to 1,200 euro per month in 2012 (2.8 times the old-age allowance, in 2012). Such a threshold is indexed with the five-year average of nominal GDP. A penalty is applied to the quota of pension calculated according to the DB method, which accounts for 1% at the age of 61, 2% at the age of 60 and then increased by 2 pp each year below 60. 121 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement Retirement age linked to life expectancy - From 2013, the SRA, the contribution requirements for early pensions regardless of age and the age requirement for early pensions under the NDC regime are all indexed to changes in life expectancy every three years (every 2 years as of 2021). Statutory retirement age - In 2014, the SRA is: 66 years and 3 months for men (all sectors) and women in the public sector; 63 years and 9 months for female employees in the private sector; 64 years and 9 months for the female self-employed. The SRA of women in the private sector is gradually aligned to that of other workers by 2018. In all cases, 20 years of contributions are also required. For the newly insured after 1995, a pension of at least 1.5 times the old age allowance is also required. The SRA is indexed to changes in life expectancy. According to a specific legislative provision, the SRA must be at least 67 in 2021. Based on the official demographic projections, such a target may be achieved in advance through the periodic indexation to changes in life expectancy. Cyprus Minimum retirement age and contributory Reduction of 0.5% per - Increase of 0.5% per month years - At age 63 with at least 33.25 basic month insurance points. At age 65 with at least 14.85 basic insurance points Retirement age linked to life expectancy - Legislated Statutory retirement age - Age 65 - It changes every 5 years in line with changes in life expectancy to be applied in 2018 and the first revision will cover the period 2018-2023 Contributory period for full pension - 49.5 years at age 65 122 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement Latvia Minimum retirement age and contributory Service Pension scheme (financed 50% of the full pensions years - Normally – 62 years and 3 months in from the state budget) for special paid until normal 2014, increases gradually every year by 3 categories (Judges, Diplomats etc.) retirement age. Full amount months until reaching 65 years in 2025; is restored after reaching Included early retirement schemes, where normal retirement age minimum retirement age – 50; Contrib. years for rights - 15 from 2014; 20 from 2025 Retirement age linked to life expectancy - The old age pension formula contains the indicator linked to the life expectancy. Statutory retirement age - 62 years and 3 months in 2014, increases gradually every year by 3 months until reaching 65 years in 2025. Opportunity to retire 2 years before the normal retirement age, if person’s insurance record is 30 years or more Lithuania Minimum retirement age and contributory special schemes are 0.4% for every month 0.67% per month or 8% per year years - statutory retirement age minus 5 years complementary to the main remaining until retirement (in case of early retirement) with minimum 30 scheme and are paid mainly from years of contribution; minimum contributory the statutory pension age to period -15 years Retirement age linked to life specific groups: scientists, judges, expectancy - not linked Statutory retirement meritorious persons and casualties; age - w61/m63; increased annually by 4 qualifying conditions for officials months for women and by 2 months for men; and military personnel scheme is 20 the rule applies also to early retirement; 65 in years of service 2060 Luxembourg Minimum retirement age and contributory annual increase of accrual rate years - 57 with 40 years of contribution scaled from 0,02% in 2012 to Retirement age linked to life expectancy - no 0,04% in 2052 Statutory retirement age - 65 years Contributory period for full pension – 40 years Hungary Minimum retirement age and contributory Early retirement subsidized by 0.5%/month years - statutory retirement age is the employer: Minimum retirement age minimum retirement age (details please see 123 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement below); minimum contributory years 15 for and contributory years - 57 (but no partial pension, 20 for full pension Retirement new entrants from 2012) age linked to life expectancy - No Statutory retirement age - 62 for those who were born before 1952, 62.5 for those who were born in 1952; 63 for those who were born in 1953, 63.5 for those who were born in 1954, 64 for those who were born in 1955, 64.5 for those who were born in 1956, 65 for those who were born in 1957 or later. Malta Minimum retirement age and contributory New legislation was introduced in years - Following the 2007 pension reform, a 2008 through which persons of person who has reached the age of 61yrs but pensionable age under the age of has not yet reached pension age, may after 65 are now able to work without reaching 61yrs claim a pension in respect of losing their pension entitlements, retirement if such person is no longer gainfully irrespective of the amount of occupied. earnings and irrespective of their Statutory retirement age - With the pension age. reform, males and females 62+ in 2014, 63+ in 2019, 64+ in 2023 and 65+ in 2027. Netherlands. Minimum retirement age and contributory later retirement is not possible years - 65 + 2m in 2014, gradually raised to 67 in 2023, and linked to life expectancy after 2023. Retirement age linked to life expectancy - Legislated, effective after 2023 Statutory retirement age - 65 + 2m in 2014, gradually raised to 67 in 2023, and linked to life expectancy after 2023 Austria Qualifying condition, minimum retirement age Minimum retirement age and Corridor (early retirement) 4.2% per year (max. 12.6%) and contributory years - Statutory retirement contributory years - 62 years pension scheme: Penalties age, min. 15 insurance years (thereof 7 years of (women), 62 years men (for women for early retirement - 5.1% contribution) Retirement age linked to life this gets relevant only by 2028), deduction per year before 124 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement expectancy - No Statutory retirement age required insurance years will be the regular retirement age (private sector) - 60 years (women), 65 years gradually raised from 38.5 years in (for persons born after (men), retirement age for women will be 2014 to 40 years in 2017 1.1.1955) gradually raised to 65 years from 2024 to 2033 Statutory retirement age (public sector) - 65 Pension scheme: Early old-age years (women and men) pension for long-term contributors - "Hacklerregelung" (early retirement pension) Refer to the regular old- age pension schemes except for what specified below Minimum retirement age and contributory years - 57 years (women born after 1.1.1959), 62 years (men born after 1.1.1954); retirement age for women will be gradually raised to 62, required contribution years - men 45, for women it will be gradually raised from 42 to also 45 Pension scheme: Heavy worker regulation - "Schwerarbeitspension" (early retirement pension) Refer to the regular old-age pension schemes except for what specified below Minimum retirement age and contributory years - 60 years (women), 60 years (men), for women this gets relevant only by 2024, minimum requirement of insurance years: 45, at least 10 years of "hard labor" (list of professions) within 20 years before retirement Penalties for early retirement - 1.8% deduction per 125 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement year before the regular retirement age (for persons born after 1.1.1955) Pension scheme: Early old-age pension with a long period of insurance - "Vorzeitige Alterspension bei langer Versicherungsdauer" (early retirement pension) Refer to the regular old-age pension schemes except for what specified below Minimum retirement age and contributory years - 59 (women), 64 (men) - after 1.1.2014, required insurance years will be gradually raised from 38.5 years in 2014 to 40 years in 2017, retirement age will also be gradually raised until the statutory retirement age is reached (therefore this option will phase out by 2017) Poland Minimum retirement age and contributory Bridging pensions: Minimum years - 65 years for men and 60 for women; DB retirement age and contributory - contributory years 25 years for men and 20 years - 65 years for men and 55 for years for women; NDC- contributory years not women; contributory years 25 years relevant, In 2060: 65 years for men and 62 for for men and 20 years for women women; contributory years 40 for men and 35 including at least 15 years in special for women Retirement age linked to life character or special conditions - expectancy - not legislated Statutory temporary solution, only for those retirement age - 65 years for men and 60 for employed in special conditions or women since 01.01.2013 increase of statutory character before 2009 year. pension by one month every 4 months. In 2060: Retirement age linked to life 67+ for men after 2020 and for women after expectancy - not legislated 2040 Statutory retirement age - 65 years 126 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement for men and 55 for women Contributory period for full pension - 25 years for men and 20 years for women Minimum retirement age and contributory years - Employed before 01.01.2013: no minimum age, 15 contributory years. In case of judges and prosecutors: 60 years for men and 55years for women and 30 and 25 contributory years in 2060: In case of Armed Services: 55 years and 25 of contributory years; Judges and Prosecutors 65 years for men and 62 years for women; and 40 and 35 contributory years Portugal Minimum retirement age and contributory The Early Retirement Pension increased by the years - 66 years in 2014 and 2015 & 15 Pension is suspended application of a bonus to the contributory years. After 2014, the standard during the Economic and amount according to the general retirement age will vary according to the Financial Adjustment formula: 1 + y, where y is a global average life expectancy at the age of 65. Programme, except for bonus rate, obtained by Retirement age linked to life expectancy - unemployed persons multiplying the monthly rate by According with legislation approved in (under specific conditions the number of contribution December 2013, Portugal has increased the or incapacity beneficiaries). months fulfilled between the pensionable age to 66 years (entered into force Accordingly with legislation, legal retirement age and the in 2014) and after 2014 on, the standard a person which had become month on which the pension retirement age will vary according to the unemployed at the age 57 begins, with an upper limit set at average life expectancy at the age of 65. or more; had completed the the age of 70 years. The monthly Statutory retirement age - 66 years old. After contributory period, bonus rate varies between 0.33% 2014, the legal age for access to old-age exhausted the and 1% according to the number pension varies with the evolution of life unemployment benefit and of contribution years fulfilled on expectancy at 65 years old, and the legal age is still unemployed, could the on which the pension begins. for access to old-age pension will be the legal claim the old age pension in retirement age in 2014 plus the number of the age of 62, without 127 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement months determined by applying a special penalty. However, a person formula. According EUROPOP2013, the legal which had become retirement age in 2060 will be 68.8 years. unemployed at the age 52 or more, with at least 22 years of contribution; had completed the contributory period, exhausted the unemployment benefit and is still unemployed, could claim the old age pension in the age of 57, with a penalty of 0,5% by each month of anticipation until the 62 years. Early pension is also granted in cases of hard or unhealthy work. Romania Minimum retirement age and contributory For active military personnel, Early retirement is not years- Minimum retirement age not regulated policeman and civil servants with a penalized, provided the by the law; minimum contributory period for special status in the field of national person exceeded by at least men and women in December 2014 -14,7, To defense, public order and national 8 years the statutory period be increased gradually up to 15 (2015) security of contribution, and can be Retirement age linked to life expectancy- Yes granted up to 5 years Statutory retirement age- December 2014: before the statutory Men – 64.9; to be increased to 65 for men retirement age of the starting with 2015. Women - 59.9; to be person. Partial early increased gradually up to 63 for women by retirement, permitted for 2030. Contributory period for full pension - persons who exceeded the December 2014: Men - 34.7; to be increased statutory full period of gradually up to 35 (by 2015). Women - 29.7; to contribution with less than be increased gradually up to 35 (by 2030). 8 years, is penalized by diminishing the benefits calculated for the old age pension, by 0.75% for each month of anticipation, 128 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement before complying with the old-age pension criteria Slovenia Minimum retirement age and contributory Early pension is reduced by On the side of Insured Person: years - Old-age pension (M and W at 60 Y of 0.3% for every missing Who fulfils 40 Y of pensionable age and completed 40 years of pensionable month of age up to the service without purchased years service without purchasing years). Early completion of 65 years of and remains insured, every pension (at 60 years of age if completed 40 age. Max. reduction: 18% further year of pensionable years of pensionable period (with purchasing for both genders. service but only up to 3 years)). More stringent early and old-age consecutive insurance years, shall pension entitlement conditions are being be valued so that 3 months of introduced gradually, with the transitional pensionable service (excluding period ending in 2018. Statutory retirement the purchase) amount to 1% age - 65 (both genders) Contributory period for accrual rate up to 20% of the full pension - Completed 40 years of early pension or old-age pension pensionable service without purchasing years to which the Insured Person at 60 Y of age or an insurance period of at least would be entitled on the date of 15 years at 65 Y of age. Additional features - claiming it, if Insured Person Old-age pension (full pension without postpones retirement. Partial purchasing years). Early pension (due to pension, increased by 5% until purchased years reduction of pension) the completion of 65 years of age, if an Insured Person acquires Partial pension. On an Employers side: Partial exemption from payment of Employer’s contributions for older employees Slovakia Minimum retirement age and contributory There is a closed DB pension system Early pension benefits are Pension benefit is increased by 6 years - Early retirement is possible 2 years of the armed forces, existing calculated as old age % per year for every additional before statutory retirement age. Minimum alongside the universal pension pension benefits; however, working year above the contributory period is 15 years. The early system. Entitlements comprise old- the early pension is reduced retirement age. pension must be higher than the minimum age pension and a temporary by 0.5 % for every 30 days subsistence level by 20%. Retirement age pension benefit, until reaching the linked to life expectancy - Yes (as from 2017) retirement age. Statutory retirement age - Statutory retirement age is currently 62 for men; for women it 129 Retirement age Special scheme Penalty for early Bonuses for postponing retirement retirement depends on the number of reared children, it is gradually increasing until 2024, then unified. As from 2017, the retirement age for both sexes will be automatically annually increased by the y-o-y difference of 5-year moving average of the unisex life expectancy. Finland Minimum retirement age and contributory Earnings related: - Old-age pension: 0.4% / month 0.6% / month years - Full pension 65, early pension 63 Army 55-63, Seafarer’s 55-60 and Retirement age linked to life expectancy - No Police officer 60 if born before Statutory retirement age – 65 1960. Earnings related: Minimum retirement age and contributory years - Old-age pension 63, min contr. period 1 month Retirement age linked to life expectancy - No Statutory retirement age - 63-68 Sweden Minimum retirement age and contributory years - 61 / 1 Retirement age linked to life expectancy - No Statutory retirement age - No upper limit United Minimum retirement age and contributory Currently 10.4% p/a for deferring Kingdom years - Based on qualifying years of national state pension. For new state insurance contributions between age 16 and pension deferral rate will be 5.8% SPA. Statutory retirement age - n/a p/a (roughly actuarially fair). Contributory period for full pension - 30 qualifying years need for full basic state pension for those reaching SPA on or after 6 April 2010. For new state pension 35 qualifying years needed for the full pension for those reach in SPA on or after 6 April 2016. Source: (European Commission DG ECFIN, 2015) 130 Annex 6. Early retirement treatment of selected jobs in 9 EU countries Bus drivers Foundry workers Long term care sector Meat processing Construction (Tilers/carpenters) Belgium Psychological strain, shift work Noise, extreme heat, changes in Work organization Repetitive work, work at low Noise, temperatures, dust, Have access to early light levels temperatures, heavy physical chemical agents, atypical retirement, mostly on work. hours company level Unemployment scheme with company supplement Italy The only profession with Dust, smoke, gases. Heavy work, forced posture. Forced posture, extreme access to early retirement Very few early retirees before But no early retirement temperatures, heavy loads due to arduous work the change of legal rules in 2011 Germany Responsibility, tight schedule, Hot environment, high level of Stressful work, narrow time Heavy loads, manual work, Forced posture, carrying, and violence, posture, climate noise. Preventive measures schedules, shift-work, flexible noise, cold and wet heavy loads. related stress. introduced. work. No early retirement. Work-based measures of No early retirement. preventive character and part- time pension in collective agreement Austria Shift work, long sitting, and Extremely hot environment. Cold and wet environment, Forced posture, carrying heavy vibration. Stress due to Dust, smoke, chemicals, noise. early retirement for heavy loads. Covered by benefits for increased traffic and violence No heavy work status granted work (based on calorie arduous works, but no access of passengers. for occupations but individual consumption). to pension scheme for heavy No early retirement. demands can be analyzed. workers. From 2015, transitional allowance pre- financed by employers. France Drivers employed under Dust, noise, temperature Psychological factors linked to Repetitive movements, Forced posture, carrying, and private law contract are not changes, hazardous substances, patients’ situations, work awkward posture. heavy loads. covered by early retirement. shift work, repetitive organization, physical risk No early retirement. No early retirement. movements. Compensation in factors. No early retirement the form of bonuses. schemes. Denmark Sedentary work, rigid posture, Heavy and awkward lifting, Support equipment for Compensation for “wear and Forced posture. exposure to cold temperature. awkward postures, air treatment services. No tear” not widely implemented, Practice of reallocation to less No compensation for wearing pollution, noise, vibrations. compensation as such, no formalized arrangements arduous job or retraining to work. No special retirement, Strong preventive legislation individual solutions possible. for early retirement. other profession. 131 Bus drivers Foundry workers Long term care sector Meat processing Construction (Tilers/carpenters) possibility to reduce working promoted. No legislation for Retraining, flexible jobs and hours after age 60 in the general early retirement, but early retirement on collective agreement. special older persons’ plan in company/occupational level. the collective agreement: saving holidays for reduced working hours, early retirement possible in occupational pension. Spain Changing shifts, extreme Exposure to dust, noise, Physical factors (manual Bio-hazardous elements, Forced postures, repetitive temperatures, night work. No chemical products, high handling of loads, repetitive noise, repetitive movements, movements, exposure to early retirement. temperatures, physical efforts. tasks), biological factors. No handling of loads. No early noise. No early retirement. No early retirement. early retirement. retirement. Poland Bus drivers employed before Foundry workers who work a No early retirement. Selected workers exposed to No early retirement. 1999 have a right to a bridging jobs related to exposure to high low temperatures employed pension. temperatures, heavy physical before 1999 have a right to a work, forced posture employed bridging pension before 1999 have a right to a bridging pension Romania Not covered by legislation Considered as arduous work Not covered by legislation Not covered by legislation Not covered by legislation granting early retirement. and results in early retirement if granting early retirement. granting early retirement. granting early retirement. workers are exposed to the presence of above the limit crystalline CO2 dust in the smelter area or above the limit noise in the cleaning area. Source: Authors’ summary of information provided in (Syndex, 2014) 132