TIRANA, April 26 – Albania’s emerging private pension market registered a strong double-digit boost in 2015 apparently boosted by legal changes stripping contributions of the personal income tax, benefiting thousands of investors.
The net asset value in the three private pension funds rose to 928 million lek (€6.7 million) in 2015, up 47.6 percent compared to 2014 when investors had to pay personal income tax for their private pension contributions, according to a report by the Financial Supervisory Authority.
The emerging market boost was fuelled by a sharp 48 percent increase in membership with a total of 12,600 investors in the three operating pension funds, Sigal, Raiffeisen and Sicred Pensions.
For the first time since their establishment in 2012, women overtook men in the emerging private pension funds, accounting for about 53 percent of total investors compared to only 44 percent in 2014.
The three operators invested the majority 96 percent of their assets in government securities compared to only 4 percent in deposits.
Raiffeisen Invest, which is a subsidiary of Raiffeisen Bank, the country’s biggest lender, posted profits of 220 million lek(€1.57 mln) in 2015, compared to modest 1.1 million lek (€7,800) by Albanian-Austrian Sigal and losses of 12 million lek (€85,600) by Albanian-Turkish Sicred.
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.
The World Bank has warned Albania needs to build the foundations of a diversified pension system where both public and private pensions are critical considering its profound demographic challenges – falling birth rates, rising life expectancy, and powerful forces for migration and emigration.
A recent survey with 500 enterprises employing more than 20 workers has shown two-thirds of employers and half of employees in Albania are not aware of the benefits of the private pension funds in Albania. The survey unveiled the development of the private pension market in Albania has also been affected by the tax burden until 2014.
The voluntary pension scheme is a supplementary pension which investors receive in addition to state pension.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.
