The Albanian government announced plans to significantly raise pensions by 2029. Prime Minister Edi Rama, confident in winning a fourth mandate in the 2025 elections, has instructed his team to focus on two major goals: achieving EU membership by 2030 and increasing pensions, which are currently among the lowest in the region.

Why is this important: The government’s strategy aims to improve retirees’ living standards while addressing structural issues in the social insurance system. Tackling wage underreporting and improving fund management are crucial steps toward sustainable pension increases.

How the pension increase will be achieved:

• Social insurance fund deficit: The social insurance fund faces a significant shortfall of around half a billion euros. This deficit is due to many employers underreporting employee wages, resulting in reduced social contributions.
• Stricter measures against informal practices: The government is set to implement aggressive measures to combat wage underreporting. By compelling employers to declare real wages, the pension fund—currently subsidized by the state—will grow, creating room for pension increases.

Immediate and long-term measures:

• Year-end bonus for pensioners: As an immediate step, the government will maintain the annual year-end bonus for retirees.
• Allocating economic growth to pensions: For a sustainable approach, the government plans to redirect a portion of economic growth that exceeds budget forecasts to the pension fund.

What’s next: The key to balancing the pension system lies in enforcing compliance with wage declarations and ensuring that every euro earned is reported. Rama emphasized that taxes should fund public services like education and healthcare, while pensions must come from social insurance contributions.

The government is optimistic that these measures, coupled with economic growth, will allow for substantial pension increases. Rama’s vision ties pension reform directly to broader economic development and EU integration efforts.