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Serbian to English: Insurance Law General field: Law/Patents Detailed field: Insurance
Source text - Serbian
Serbian: Insurance Law.
Translation - English
English: Insurance Law.
Serbian to English: Farmers' Pension Insurance General field: Bus/Financial Detailed field: Finance (general)
Source text - Serbian
A new study by one of the strongest think tanks in Eastern Europe on Farmers' Pension Insurance in Serbia.
Translation - English
CLDS will soon publish it on this web page.
"21. We have already seen that the local authorities (municipalities and cities) are obliged by law to submit to the Fund notice of any change of significance for the status of the insured, such as registration for insurance and cancellation of insurance and related personal changes. They, however, do not do that at all, so that the PDI Fund is forced to limit itself only to the changes reported to it by the insured themselves due to their needs: be it cancellation of insurance (due to death, transfer to another insurance etc.), be it registration (for acquiring the entitlement to agricultural subsidies etc.). Of course, the number of the insured is automatically decreased by the number of the farmers who get retired during a year. All this, of course, is totally insufficient to maintain the necessary databases on insured persons and their affairs, since the Register records keep those who long ago cancelled the agricultural pension insurance (transferred to employee insurance or self-employed insurance) but did report it, then the deceased insured, members of agricultural households who are no longer under the law obligated to be insured but have not cancelled insurance, etc.
There are weaknesses in the Tax Administration, as even it does not submit to the PDI Fund all the information about the payment of contributions, etc. The annual report of the PDI Fund mentions «non-performance of the legally prescribed obligations by Tax Administration (failure to submit M-4 forms for the self-employed insured and farmers)». This in other words means that the PDI Fund does not know who of the insured is paying contributions and who is not, it therefore does not know who from the Register is really active and performs their duties, and who has long ago stopped doing so. This problem was created, or enhanced, since changing the law in 2003, when control responsibility for payment of contributions was transferred from the PDI Fund to the Tax Administration, which as we have seen, does not do that regularly.
Such insufficiently updated Register records prevent any sensible action of the PDI Fund and the Tax Administration towards collection of due contributions or arrears, since they do not know which person is insured and which is not, who could be covered by mandatory insurance and who could not, who is of sufficient age to become insured and who died long time ago.
22. The other side of the inaccurate Register records and poor payment of contributions by the insured is the high debt of the insured to the PDI Fund. Of course, a part of the debt is fictitious, because it applies to persons who are not or are not intended to be insured. This is what it looked like in 2005:
• Debt carried over from 2004 – RSD 7.71 billion,
• Contribution debited for 2005 – RSD 6.93 billion,
• Contribution collected for 2005 – RSD 1.75 billion,
• Balance of debt as at December 31, 2005 – RSD 12.92 billion.
Since then to this day the debt has increased substantially, due to no payment as well as due to debiting the amount of contribution for the farmers who are no longer insured. Due to the latter (i.e. due to the incorrect records) the amount of debt is not reliable, and it is not relevant for analysis.
23. Strong incentive to the expansion of the mandatory pension insurance should be the linkage of insurance to the entitlement to apply for state subsidies. Namely, the standard requirement of the Government for a farmer to qualify for subsidy is the confirmation from the PDI Fund on payment of contributions for pension insurance in that and the previous year. This is an incentive for the farmers to participate in the pension insurance, i.e. to pay the contributions.
However, it seems incentive to insure by conditioning of agricultural subsidies does not give the expected results. This can be seen from quite a small total number of the insured who are paying contributions or from modest total revenue from pension contributions of farmers (Table 3). Such an outcome could be explained either by (1) the fact that practically all active insured are exactly those applying for the subsidy, so that others do not pay contributions, or by assuming (2) confirmation of payment of pension contributions can somehow be dodged, or bypassed, of which there are indications. Be that as it may, despite a formal request for regular payment of contributions, the number of active insured is modest.
More generally speaking, there are reasons why the request for the regular payment of pension contributions to be eligible for subsidies can hardly bring about a complete success. Let us mention three:
• a significant number of agricultural households is not interested in state subsidies, due to weak human and material resources, inactive subsidies, complicated procedures for the implementation of subsidies, small or unsuitable property and so on,
• some of the state subsidies are modest in value, so farmers do not find it profitable to pay one year of pension contributions in order to get a much smaller subsidy,
• complete and strict insistence on the aforementioned conditioning exercise questions the implementation of agricultural policy, because, if some farms give up the subsidies because of the obligation to pay pension contributions, there will be less interest in the subsidies compared to potential unconditional funding, and therefore only the Ministry of Agriculture would have a motive to drop conditions; In other words, it is natural to see the conflict between the goals of spreading the coverage of pension insurance and strengthening of agricultural production, and it will not be surprising if conditionality is aborted (at least partially), and some subsidies no longer requiring certificate of paid contributions: For example, the premium for milk, production with higher added value and to develop non-agricultural activities in the countryside for 2010.
24. There is another powerful incentive for the participation of farmers in the pension insurance: a favorable ratio of paid contributions to pensions, i.e. expense to income of farmers. In fact, farmer insurance solutions in effect give a good financial calculation for farmers and allow them a strategy of partial payment of contributions. This is what it is about:
1. In Serbia, the right to retire is attained at 40 years of pensionable service (men) or at 65 years of age and at least 15 years of pensionable service;
2. Farmers pay pension contribution against the minimum base, which last year amounted to 35% of the average salary in Serbia,
3. There is minimum pension, which for farmers amounted to RSD 8,385 in 2009,
4. If the farmer pays contributions for 15 years, retires and receives (minimum) pension, then they will receive a high subsidy (or gift) from the Republic of Serbia equal to as much as 62.1% of the pension.
Namely, by the implementation of general regulations on the calculation of pension, such a farmer would receive a pension which would amount to only RSD 3,174 , but the PDI Fund pays him a minimum of RSD 8,385 per month. This is how the unearned transfer of RSD 5211 a month is realized, or 62.1% of the paid pension. This gift is paid by the budget of the Republic of Serbia. Of course, with the increasing number of years of pension service that gift is decreasing and the farmers' pension calculated according to the general regulations is equalized with the minimum pension for 40 years of pensionable service, and only then does the mentioned subsidy for male pensioners disappear.
By way of this gift, the legislator has, by all means, given incentive for the participation of farmers in the pension insurance: However, this incentive is only for limited participation, i.e. for the optimization of their position, which results in a strategy to achieve the minimum pensionable service of 15 years. That is when, as we have seen, the financial calculation is the most favorable for the farmer."
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Bachelor's degree - University of Novi Sad, Serbia
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