By *Elvis Ponari
Living becomes more and more expensive, prices and inflation increase while the value of the lek decreases.
And among the social groups that suffer the most from this are the people who will retire, who year after year are poorer.
The problems of unemployment, informality and especially immigration of working age have significantly reduced the percentage of the contributing population in the last 15 years, creating great social concern for the future.
Projections show that by 2030, the working-age population will shrink systematically, while the number of pensioners will increase rapidly, putting the pension scheme at risk.
Taking concrete measures is a must if we don’t want this to go right
abyss.
An example to make the situation clearer: if in 2020 we had 1.4 contributors for 1 beneficiary, the indicator dropped to 1.17 contributors for one beneficiary in March 2022.
What should be done?
Europe has been thinking about this for years and decades, making it possible to maintain the standard of living for its citizens, even when they stop working. Because the quality and strength of a state are its citizens.
When the citizens of a country work and have sufficient income in retirement, it is stronger, moves forward and the economy develops.
In Albania it works quite differently: Very few people work, very few people have good salaries, and many/all poor pensioners. This means that those who are still working are still supporting the pensioners. Or the state keeps them. It’s pointless!
So, the state should think that pensioners, like any other citizen, should be independent.
When the citizen is financially and economically independent, the state is powerful.
The state has drafted laws, built the “road” for people to work, earn, enjoy, save and when they retire continue with the same standard of living. Because the citizen has contributed during his life. He worked and in the evaluation of the contributions paid he should be rewarded.
But let’s dwell a bit on pensions and how does the scheme work in Europe?
The state says: “Yes, a part of the taxes that I receive from social security will be transferred to the private scheme, so that they can be accumulated, invested, and when you retire, you will receive more money.” This is all.
EUROPE DOES NOT HAVE HIGHER PENSIONS THAN US!
Europe does not have higher pensions than we do. Europe has only 3 pension options (from the state, from private to the state and from private). This is missing today in Albania!
The IMF, World Bank and ISSH have joined together to find a solution to this deficit
problem.
To do what Europe did in the 90s, applying the private scheme.
Money that is saved, that is invested in private funds, develops the economy. The simplest and closest example is that of the neighboring country, North Macedonia, which developed a private pension scheme in 2015, following the suggestions of the World Bank. (We in Albania did not do this)
And today, North Macedonia has over 2 billion Euro of assets, influencing the development as well
economy of the country (roads, schools, airports, etc.). This money has been accumulated, invested, given a return and all this goes to the individual as a pension.
And today the Macedonian pensioner has a higher pension than an Albanian pensioner (Average pension in North Macedonia 278 Euros; in Albania 126 Euros).
Moving to the third column of the private scheme, the best solution
This scheme is for the benefit of the citizen, as the interest returns are higher, even than the banks.
According to the new law on private pensions, which came into effect at the end of last year, the maximum monthly tax exemption limit increases up to the level of the approved minimum salary, which is currently recorded at 40,000 ALL per month.
From this incentive, the amount of tax-exempt contributions reaches up to 480,000 ALL per year or 140% more compared to the threshold set in the old law of 200,000 ALL.
Specifically, Article 156 of the law stipulates that the contribution made by each member of a pension fund is deducted from his personal income for tatami effect. Investment returns, including capital gains from investments made with pension fund assets are not subject to taxation, neither for the pension fund itself nor for the management company.
Contributions made by the employer and any other contributor, in the name and on behalf of the member of a pension fund, for fiscal effects, are not assessed as personal income of the member. The maximum monthly limit, for tax benefits, is up to the level of the minimum wage approved in
country scale.
Contributions and private pensions paid by the employer in favor of the employee will be exempted from tax to the same extent.
Specifically, according to Article 157 of the law “Contributions made by the employer in the interest of
its employees in a pension fund are assessed an operating expense up to the annual amount for each employee, equal to the annual minimum wage approved at the national level, and this amount is assessed as a recognized expense for income tax purposes”
According to the latest figures from the AMF, today there are 38 members in the private pension scheme, or 1% or 2% of the workforce. A figure that has been increasing all the time, but still very low, since at least 25% or 30% of them should have been.
This is the situation today. Therefore, among the measures that must be taken to improve the market
pensions is the development of private schemes. This system is an imperative requirement of the time.
The private pension scheme solves the problems that time dictates
First, it solves the generational conflict, making the younger generation more interested in insurance.
Second, resolve reduces informality. A very worrying phenomenon for the Albanian economy, which
occupies about 30% of it.
Thirdly, it offers benefits under more favorable conditions of age, length of service and pension measure. like
and have a transparent and favorable fiscal system.
These and many other reasons mean that today private pensions are developing at high rates in all countries of the world.
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