TIRANA, Oct. 14 – Two-thirds of employers and half of employees in Albania are not aware of the benefits of the private pension funds in Albania, according to a survey with 500 enterprises employing more than 20 workers.
The survey conducted in June 2015 showed only 22 enterprises or a total of 1 percent of the surveyed companies offered private pension benefits to their employees, mainly foreign companies operating in Tirana in the finance and insurance sectors.
Lack of confidence is a key factor in the employers’ hesitation to engage in private pension funds, showed the survey introduced during a conference by the Financial Supervisory Authority.
About one third of enterprises (31 percent) said they don’t have enough trust in the companies that manage the pension funds and about a quarter (23 percent) said they lacked confidence in the financial system which affects their plans to offers pension plans.
Enkeleda Shehi, the director of the Financial Supervisory Authority supervising the three pension funds in Albania, said the poor marketing strategy followed by the private pension companies had also affected the confidence level and the information on these funds.
The survey unveiled the development of the private pension market in Albania has also been affected by the tax burden until 2014. Starting this year, contributions in the emerging private pension market have been stripped of the personal income tax, benefiting thousands of members of the private pension funds.
“The reformation of the pension system is a joint commitment where the compulsory and alternative systems are complementary, serving the population’s living standard,” said Shehi.
Tahseen Sayed, the World Bank country manager for Albania, said Albania, like many other countries, faces profound demographic challenges – falling birth rates, rising life expectancy, and powerful forces for migration and emigration.
“One way to tackle this challenge is through a diversified pension system, with strong public and private pensions so that people do not face unmanageable falls in their income as they get old and start to leave the workforce,” she said.
“Albania needs to build now the foundations of a diversified pension system where both public and private pensions are critical,” added Sayed.
Net asset value in the emerging private pension market rose to around 755 million lek (€5.3 mln) at the end of the first half of 2015, registering a considerable 20 percent increase compared to the end of 2014, according to data published by the country’s Financial Supervisory Authority.
However, private pensions account for only 0.7 percent of the total markets supervised by the Financial Authority and 0.05 percent of the GDP.
Total membership in the three operating pension funds, Sigal Life Pension, Raiffeisen Pensions, and Sicred Pensions rose by 27 percent to 10,791 compared to the end of 2014.
The emerging private pension market registered a sharp 45 percent in 2014, with its net asset value growing to €4.4 mln.
Raiffeisen Invest, which is a subsidiary of Raiffeisen Bank, the country’s biggest commercial bank, was the only operator to post profits of 254 million lek (Euro 1.8 million) in 2014.
Meanwhile, Sigal and Sicred, two Albanian-Austrian and Turkish-Albanian joint ventures, posted losses at the end of 2014.
The voluntary private pension market holds less than 0.1 percent of financial system assets and aims at supplementing pensions offered under the government’s obligatory scheme.
