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Despite the reform undertaken in 2015 in the social security scheme, which focused on increasing the retirement age, the scheme continues to inherit problems, such as the budget deficit due to the low number of contributions and high expenses. According to a recent analysis by the International Monetary Fund, the coverage rate in the pension scheme for the working-age population remains low in Albania, especially for the self-employed. According to the IMF, currently only about 38 percent of the population considered to be of working age 15-64 contribute to the pension scheme.
Referring to the analysis made, the IMF predicts that pensions will be in difficulty in the coming years and therefore a new reform should be undertaken, accepting the latest trends. "The future developments of the pension deficit are uncertain. Pension expenditure and income accounted for 6.1 percent and 5 percent of GDP respectively in 2022, with a deficit of about 1 percent of GDP. The income base is weakened by informality, unemployment and inactivity. The spending side is likely to shift towards more non-contributory benefits as current working-age generations reach retirement age," the IMF points out.
For this reason, the International Monetary Fund suggests policies that the government should follow to improve the scheme. "The priority is to address the poor coverage of the working age population. Options to consider are maintaining incentives for working-age adults to honor contributions. This means maintaining the contribution rate at a reasonable level and perhaps conducting studies to understand if shortening the time of the contributions will affect the increase in the number of contributors", the IMF underlines.
Also, another policy that is suggested is "giving security to citizens that the level of future pensions is well harmonized with past contributions, which would avoid obstacles to participate in the scheme. Voluntary private pension plans, possibly with automatic enrolment, have proven to be a good channel in some countries to encourage citizen participation and increase financial inclusion. However, the relevant tax exemptions should be treated with care, as they also limit income and have a significant impact on participation."
At the beginning of this year, when asked by SCAN TV, the Minister of Finance Ervin Mete admitted that the time has come and work is underway to review the pension scheme, so that it is more functional and dignified.
Referring to official data from the Social Insurance Institute for the first 6 months of 2023, the number of contributors to the pension scheme is 831 thousand individuals, while the number of beneficiaries is 761 thousand individuals. The subsidy that the scheme receives from the state budget for this period is calculated at 8.8 billion ALL./ SCAN
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