TIRANA, Feb. 20 – Albania’s emerging private pension market grew by 31 percent in 2017, but its net assets accounted for only 1.73 billion lek (€13 million), a modest amount considering three market operators that have been operating since 2012.
A report by Albania’s Financial Supervisory Authority shows membership in the three voluntary pension funds grew by 21 percent to about 20,950 at the end of 2017, with women members holding a slight advantage of 53.5 percent.
Private pension operators invested all of their assets in government securities in the internal market in 2017.
The three market operators include Raiffeisen, a subsidiary of Raiffeisen Bank, Albanian-Austrian Sigal and Albanian-Turkish Sicred Pension.
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.
By contrast, net assets in the three investment funds, two of which have been operational since 2012, grew to 72.7 billion lek (€547 mln) at the end of 2017, accounting for about 5 percent of the country’s GDP, according to the financial watchdog.
The hike also comes at a time when interest rates in traditional deposits stand close to zero and investments funds, overwhelmingly investing in government securities, offer much more profitable investment alternatives.
Surveys have shown two-thirds of employers and half of employees in Albania are not aware of the benefits of the private pension funds in Albania. A survey conducted by Albania’s Financial Supervisory Authority has unveiled the development of the private pension market in Albania was also negatively affected by the tax burden until 2014. Starting 2015, 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 World Bank has suggested that Albania should tackle demographic challenges such as falling birth rates, rising life expectancy and migration 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.
Women in Albania are less likely to receive a pension in old age, making them significantly more likely to suffer poverty, according to a United Nations report on progress of the world’s women for 2015-2016. The report shows only 61 percent of women in Albania above the statutory pensionable age of 60 receive an old age pension, compared to 100 percent of men, leaving 39 percent of women vulnerable to poverty.
Under the new pension reform, 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.
