Croatian pension funds are interested in projects with which the government aims to reduce the budget deficit and public debt, but their interest is not unconditional, the heads of four mandatory pension funds said on Monday.
They spoke at a press conference organised by the UMFO association of pension management and insurance companies at which the four pension funds presented their 2015 results.
The chairman of the UMFO and of the board of the Erste Plavi pension fund, Petar Vlaic, said that no agreement had yet been reached with the government on the participation of the pension funds in government projects, but that talks were under way.
"We have expressed our interest not just in infrastructure projects, but also in investing in Croatian companies, and I am certain that we will reach an arrangement whereby the Croatian pension funds will increase their investment in Croatian companies," Vlaic said.
He said that talks were under way with the government on the problem of the HAC motorways operator, but that no agreement was reached yet. "We are advocating an initial public offering. We believe that the Croatian motorways have potential and that the pension funds can contribute to it. We have the funds to buy (a stake)."
Vlaic said that under the law the pension funds can invest in infrastructure up to 15 percent of the assets they manage, which is currently about HRK 10.75 billion in total. "We have studied the motorways system in Croatia and we have the expertise. If we were to invest in the motorways, we would certainly want to have management control and would insist on business rationalisation. In particular, we would want to increase revenue without having to increase toll rates and increase the share of truck transport, which today accounts for only 10 percent of the toll revenue."
The head of the Raiffeisen pension fund management company, Damir Grbavac, said that the interest of the pension funds in government projects was not unconditional and that their decision would not be a joint one. "Each of us will work to ensure that the projects are well structured and then each will decide on their own, in the interests of their members, rather than as a holding company," Grbavac said.
The board chairmen of the mandatory pension fund management companies said they could see no reason for reducing or abolishing payments into the Second Pension Pillar and that payments should actually be increased.
Vlaic warned that the problem of pension payments would only deteriorate given alarming demographic data for Croatia, which show that by 2030 the size of the active work population in the country could be reduced by nearly 385,000 and the number of pensioners could increase by more than 207,000, whereby the current pensioner-employee ratio of 1:1.15 could fall below 1:1 and Croatia could end up having more pensioners than people in work.
Vlaic said that the purpose of the Second Pension Pillar was to ease deficits in the pension system and the effects of negative demographic developments. He said that 1.73 million members, which is more than the total number of employed people, paid contributions into the Second Pension Pillar.
At the end of 2015 the four mandatory pension funds managed HRK 74.04 billion in total assets, which was 22.5 per cent of GDP. Of that amount, HRK 49.02 billion accounted for contributions and HRK 25.02 billion was earnings from the investment of contribution funds. The average annual yield over the last 14 years of the existence of the four funds was 5.88 percent, or 3.65 percent in real terms (less inflation).
The bulk of the funds' assets, or nearly HRK 54 billion (72 percent) is invested in government bonds, while HRK 7.74 billion is invested in domestic bonds. Last year the pension funds were involved in all major recapitalisation projects investing, inter alia, HRK 300 million in the Podravka food company and HRK 164 million in the Croatian postal savings banks HPB, Vlaic said.
(EUR 1 = HRK 7.62)