Slovakia Adopts Personal Retirement Accounts
April 5, 2004
Slovakia, a country once controlled by communist Russia, is moving to privatize its national pension system by adopting a system of personal retirement accounts similar to those the Bush administration has proposed for the United States. In December 2003, the Slovak Parliament approved the law on the old-age pension savings scheme, and workers have since deposited 9 percent of their earnings into personal savings accounts.
Jose Pinera, architect of groundbreaking social security reform in Chile, says that American workers deserve the same security, control and wealth-building opportunity as the Slovakians. After all, if a former communist state like Slovakia can privatize its social security system, there's no reason why the United States can't do the same thing. In fact, many countries have already successfully privatized their systems:
- About 80 percent of British workers have a portion of their earnings go toward a personal savings account.
- In 1997, Mexico adopted a personal account option for all beneficiaries under the country's retirement system.
- Similarly, Hungarian workers began paying into personal accounts in 1998, replacing the bulk of the government-run retirement system.
- Even China has made strides in pension privatization -- already it has adopted a personal account system for urban workers and plans to extend it country-wide.
Pinera says the main winners of social security reform are the poor, not the rich. "High- wage earners can always save for their own retirement," he explains, "but medium and lower-income workers don't have the spare cash to save in separate individual retirement accounts; they suffer the most with negligible returns on their Social Security payments."
Source: John Skorburg, "Slovakia Adopts Personal Retirement Accounts," Heartland Institute, February 2004.
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