Pensions, “attack” on finances
10/11/2011 00:00
Linda Rama: Between Family, Work and Albania’s Future 18/08 14:30
In 2002, the Albanian government approved a law that increased the pension age by five years, for men and women alike.
According to this law, the pension age would gradually increase by 6 months each year, for 10 years. The law had two purposes: first, to ease the pension budget burden, and secondly, to postpone these payments in time, since the gradual age increase halved each year the number of people who went to pension.
This reform is coming to its end. Next year, the gradual pension increase will be over. This makes 2012 the year when the number of people who go to pension will double, from 13.000 to 27.000. But this is not the only problem. Very soon, Albania will start feeling the consequences of population aging.
Due to the childbirth boom after the war, in the ‘50s, the Ministry of Finances notes with great concern that by 2014, the number of new pensioners will increase significantly, in a time when the job market not only is not expected to grow, but is falling.
Albania has 929.000 employed people, or 43.000 less than 2 years ago, which means that there are fewer people who pay insurances and more pensioners who need to be paid.
The government pays each year more pensions
The Government is being obliged to increase the pension fund each year, due to the deficit that is deepening with a fast pace. Compared to 2000, the pension expenses have increased from 3.6 to 4.3% of the GDP.
On the same time, contributes have fallen from 3.3 to 2.9%. This makes Albania spend 1.4% of the annual GDP for filling the pension gap. And this is not because the Albanian pensioners receive big payments, but on the contrary, because the working Albanians have low wages. According to IMF, despite the economic growth, the payment of a pensioner in an Albanian village is 16.3% of the average wage and 29.3% for a pensioner in urban areas.
Albania keeps postponing the pensions reform, but the more it’s postpones, the biggest are the costs. For as long that politics will not come up with something to do about pensions, the scheme will continue receiving hundreds of USD from the taxes, until it will become unaffordable for the budget.
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