LEGAL AND ECONOMIC BASIS OF PENSION INDEXATION

Indexation or pension adjustment is one of the key issues in pension insurance system. Entitlements emerging from this insurance, i.e. social rights, belong to the third generation of human rights. It means that acquired rights are not defined in a certain scope for an
indefinite period of time, but rather they develop, as other similar rights, depending on the economy of the society in which they are granted. Consequently, pension indexation formulae change in accordance with economic situation of a particular country, i.e. society. Most countries that are economically more developed than Croatia change the model of pension indexation by wages to indexation by cost of living. The most appropriate solution
for Croatia would be the combination of indexation by wages and cost of living. Pensions are economic-social category; therefore pensioners should not be, under any circumstances, excluded from the presumed labor productivity growth after their retiring.
This presumption implies that pension should be, if not completely, then at least partially indexed by wages. This manner of maintaining “connection” between pensions and economic
growth is socially, economically, and morally justified.