Opposition asked for consensus on pension reform

TIRANA, June 6 – Government has called on the opposition Socialist Party to give consensus on a new scheme it is preparing to reform the country’s pension system in the long term considering the widening deficit. Speaking on Wednesday at a ceremony on the 20th anniversary of the foundation of the Social Security Institute, Finance Minister Ridvan Bode said government was preparing a new formula on the collection of social security contributions and their allocation through pensions.
He said the new formula had been compiled under World Bank assistance but would be announced in a quieter political situation.
“The new system targets the final solution to a series of issues such as introducing promoting elements of increasing participation and payment of contributions based on real salaries,” said Bode.
According to the World Bank, Albania’s 8.2 percent of the GDP expenditure on social protection is just below the 10 percent limit which risks investments in other key priority sectors such as education and health.
Without ruling out the possibility of increasing retirement age, Finance Minister Ridvan Bode has earlier considered the reform a necessity. “Several key measures related to the contribution rate, the number of participants in the scheme and the fight against informality need to be taken into consideration,” said Bode.
As the pension reform initiated back in 2002 concludes this year with the retirement age having gradually increased to 65 years for men and 60 for women, the number of new pensioners in Albania will double, having extra costs for government to cover the deficit in pension scheme. Finance Ministry data in the 2012 draft budget report show the deficit in the pension scheme in 2012 will rise to 38.188 billion lek, (USD 380 million) compared to an expected 38.037 billion lek for 2011 under new expected cuts, which means an extra 151 million lek (USD 1.5 million) only if optimistic targets on social security collection rates are met under the government scenario. Controls carried out by the High State Audit show that a considerable number of big businesses pay social security and health insurance contributions for a single person. The current ratio is 1.4 contributions to 1 pensioner at a time when a stable pension scheme requires at least 3 contributions for one pension.
Social security contributions currently stand at 24.5 percent, of which 15 percent is paid by employers and 9.5 percent by employees. Meanwhile, health insurance contributions are at 3.4 percent, shared by 1.7 percent between employers and employees. Social Insurance Institute data show Albania had 540,422 pensioners in 2009 around 6,000 more than in 2008.