“Supplementary indexation, equality in the contribution formula” - World Bank proposals for the pension scheme in Albania
The challenges facing Albania, such as emigration, declining fertility, population aging, and informality in the labor market, are putting pressure on the pension scheme, making it necessary to undertake a new reform.
The World Bank estimates that in the coming decades, when the number of pensioners is projected to double and the number of employees to halve, several essential interventions are proposed.
Zoran Anusic, Senior Economist at the World Bank:
"What can be done to improve the results of the pension system? Length of service years. This does not mean increasing the retirement age. But flexible mechanisms and different combinations of elements can be made. Improving compliance and increasing the coverage of contributors in the system. There are direct legal implications here but also indirect ones. Improving equality and incentives to contribute. The first has to do with the equality of the pension formula at 50 years of service where the social pension is also introduced, there may be cases when there are individuals who have fewer years of work to enter and participate in the social pension system and may not be interested for this reason and the second is the area of early retirement, and for specific professions. Increasing systemic pensions rather than ad hoc, means higher contributions and for current pensioners in the system what can be considered may be a supplementary indexation within the framework of some specific conditions. Strengthening the framework for individually funded pensions.
Meanwhile, Deputy Minister of Economy, Olta Manjani, stated that in the face of these challenges, it will also be discussed whether it is necessary to include a mandatory second pillar in the scheme.
"The challenges we face are coverage; adequacy; sustainability; Equality. Parametric or systemic reform? It will be discussed whether there is a need for a second pillar. All these factors will be taken into account. Another important element is what will change in existing pensions? We have a large stock of 720 thousand pensions that are currently being received. We must take into account not only demographic factors but also trends in the labor market."
The international conference on pension reform will come to several conclusions that will be taken into consideration for implementation.
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