TIRANA, Jan. 27 – For the first time in more than a decade, Albania’s huge pension deficit has suffered a moderate decline. The reform initiated in the pension system in 2014 and tighter penalties introduced for repeated violations with the declaration of employees seem to have had a positive impact on the social security scheme.
Finance Ministry data show the deficit in the pension scheme dropped to 40 billion lek (Euro 281 million), down from 44.5 billion lek (Euro 313 million) in 2014, registering the first decrease since more than a decade.
The Albanian government has tightened penalties against businesses by introducing criminal investigation and imprisonment for repeated violations with the declaration of employees and the use of cash registers in a bid to reduce informality estimated at more than 30 percent of the GDP.
In late July 2014, the left-wing Socialist Party-led majority approved a pension reform drafted under World Bank assistance in a bid to reduce the huge gap in the system which secures 45 percent of funding from other government revenue, proposing an increase in the retirement age for women and the introduction of social pensions for people aged 70 and over who have not contributed to the system.
The new system envisages that starting January 2015, the retirement age for women, currently at 60, will gradually increase by two months per year to reach 63 years old by 2032. The increase in retirement age for men, currently at 65, will continue only after 2032, to reach 67. The retirement age for both men and women is expected to increase to 67 years old by 2056.
The increase in the retirement sparked reactions considering Albania’s high youth unemployment rate of around 34 percent, but experts say it is a necessity considering the huge deficit and the projected ageing of the population.
Some 5,000 people aged 70 and over who have not contributed to the system, are expected to benefit monthly social pensions of around 6,646 lek (Euro 46.5) starting from January 2015.
Albania has 570,000 pensioners and some 700,000 contributors to the scheme with the gap in the pension system increasing to $430 million in 2013.
