SLOVENIA - The International Monetary Fund has criticised as "insufficient" pension reform proposals facing a referendum in Slovenia this weekend.

The organisation also endorsed government plans to freeze pension payments at the current rate if it were to lose the vote on Sunday.

Proposals currently include increasing the retirement age to 65, as well as lowering the replacement rate on pensions and changing the way pensioners can access their second-pillar retirement savings.

However, in a consultation published by the IMF this week, the organisation warned that the reform proposals did not go far enough to address growing pressures on the state Treasury that will see pension expenditure grow to one of the highest levels in the European Union by 2050.

"The pension reform approved by the parliament is a step in the right direction but is insufficient in the long run," the report said, adding that additional measures were needed to control expenditure.

These included a faster increase in the effective retirement age of both men and women, as well as automatically linking the retirement age to life expectancy once a pensioner has reached 65.

The IMF further suggested the effective retirement age for both men and women should be increased to 65, arguing that this could be achieved if the penalty for early retirement were increased to between 6% and 7% of pension per annum.

The report continued: "The private pillar should be expanded to compensate for the public benefit cuts while ensuring the portability of the benefits."

While the current pension reforms were passed by Slovenia's parliament in December last year, a legal challenge by unions has resulted in Sunday's binding referendum on the reforms.

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