REFORM OF PENSION INSURANCE IN 1989-96 AN D PROBLEMS OF THE PRESENT SYSTEM

As the economic reform began in the early '90s, so did a fundamental r estructuring of the entire pension system. The goal of this restructur ing was to establish a pension system that: - met the needs of a marke t economy; - encouraged individuals, as well as social groups, to take responsibility for themselves and their social independence; - compli ed with international conventions, and met the requirements for coordi nating pension insurance systems. A significant aspect of this reform is reducing people dependence on the state, this dependence was excess ive during the former previous regime. A critique of the applicable le gal provision in 1990 showed significant defects - the negative influe nce of the pension insurance level would have a strong impact during t he transition period. The goal of the penision insurance reform was to remove such deficiencies. This was, however, possible only by impleme nting fundamental changes that on the one hand brought about a number of improvements, but also imposed certain limitations necessary to mai ntain reasonable pension costs. The transformation process between 199 0 and 1996 established the pension system, based on two pillars: - The obligatory pension insurance based on the principle of social solidar ity. Its funding is pay-as-you-go (no fund is created, pensions are pa id within the particular period directly from premiums from people). - Voluntary state-contributory supplementary pension insurance that is taken as individual saving, and is fully funded. This article explains the main changes and their consequences during 1990 - 1996, analyses the main shortcoming of the present pension system, and suggests same possible trends.