A 2023 reform let long-tenured workers quit early on favourable terms, straining public finances and draining key sectors of experienced staff.
Slovakia’s decision to relax early retirement rules in 2023 triggered a mass exit from the workforce and saddled public finances with lasting costs.
Former labour minister Milan Krajniak introduced a reform allowing anyone with 40 years of service to retire at any age, with pensions cut by just 0.3% a month. At the same time, an unusual feature of the pension system – so-called “first valorisation” – automatically boosted new pensions in line with inflation. When inflation surged during the energy crisis, this double-counting meant new retirees gained a permanent windfall of EUR 110-160 a month.
The result was dramatic. More than 61,000 people retired early in 2023 and 2024, two-and-a-half times the usual number. Many secured pensions higher than if they had waited until the statutory age. For the state, however, it created a double burden: more pensioners to support, and fewer workers paying contributions.
According to the Council for Budget Responsibility (RRZ), the measure will cost EUR 1.5 billion until 2031 – roughly split between higher payouts (EUR 897 million) and lost tax and social contributions (EUR 776 million). The surge deepened Slovakia’s budget deficit by almost EUR 500 million in 2023 and another EUR 400 million this year. The Social Insurance Agency (Socialna poistovna), which pays pensions, recorded a record deficit of nearly EUR 3 billion.
The labour market was also hit. At its peak in 2024, early retirements meant 22,000 fewer workers on average each month, especially in manufacturing, retail and transport. Employers have struggled to replace experienced staff, and foreign workers from Ukraine, India and the Philippines have only partly filled the gap.
In May 2024, the government tightened the rules again, restoring the higher penalty of 0.5% per month and linking eligibility to the shifting retirement age rather than a fixed 40 years. Analysts say this should stem the flow. But with tens of thousands already gone, the fiscal and labour market effects will linger until at least 2027 and fade only after 2031. Until then, the extra debt – equal to about 1% of GDP – will remain. (The Slovak Spectator)