ISSH draft decision on pensions revealed - After revaluation with new coefficients, reference salaries increase by 8.6%
All reference salaries before 1994, for the purpose of calculating pensions, will be revalued with the coefficient 13.397, recognizing an average increase of about 8.6 percent compared to the previous year. The Social Security Institute has approved the draft decision “On the approval of the indexation coefficient of the estimated base for calculating pensions”. SCAN TV has secured a copy of the document, which is expected to be submitted for approval to the Government very soon.
These indices, as noted in the report, will be applied to all pensions with a valid birth date from 01.01.2025, while for pensions with a valid birth date until 31.12.2024, the entire pension amount, consisting of the basic amount and the supplement, is indexed according to the annual consumer price index.
"By increasing the individual estimated base, for all persons whose right to a pension arose from 01.01.2025, from this date onwards, it will be possible to calculate and grant monthly pensions that are directly related to the contributions paid and that only because of them can be higher than before," the report further states.
Specifically, after the revaluation with the coefficient 13,397, the maximum salary becomes 110,123 from 100,752 which was a year ago, while the minimum salary from 30,225 lek becomes 33,037 lek, thus recognizing an increase of about 8.6 percent. This consequently means higher pensions for those who reach retirement age this year.
"This coefficient will increase the estimated base for around 40 thousand people who will apply for new pensions by the end of 2025, as well as in the coming years, enabling their pensions to be harmonized with the contributions paid," the document further states.
That said, a citizen who worked in transportation and received 3,233 lek per month, the salary based on which contributions will be calculated will be the revalued salary, which means (3,233 X 13,397) 43,312 lek per month.
But, while for salaries before '94 the coefficient that is applied is unified, for salaries after '94 the coefficients are different. This is not without purpose, given that the level of salaries is also different. Thus for the year 1995, the coefficient is 10,781, for salaries in 1996 it is 8,365, the same is applied for salaries a year later.
While for the year 1998, salaries are indexed at 6,990, to continue with the year 1999, where the coefficient is 5,673 and so on until 2023. For the last two years, i.e. for 2024 and 2025, the indexation formula is not applied, but salaries are referred to as they are.
"The methodology determines that each year, the individual annual salary is indexed with the annual indexation coefficient that is calculated as the ratio of the average contribution for an insured person, paid in the last calendar year, against the same indicator of the previous year.
So it is the growth rate from year to year of the average annual contribution paid by a person that determines the index amount. In other words, the amount of future pensions depends primarily on individual contributions, but also on the growth rate of the average contribution from one year to the next. The formula for determining the initial pension, reformed in 2014, focuses on deepening the contributory principle of the pension system.
The pension calculation scheme defines a basic pension and a supplement. The basic pension is around 9800, while the supplement, based on the pension calculation formula, is 1 percent for each year of insurance, multiplied by the average assessable base that the insured persons have achieved through the contributions paid.
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