Albania to review pension scheme with expert consultation

The Albanian government is continuing discussions with both international financial institutions and local experts regarding potential adjustments to the country’s pension system. Speaking at a recent conference, Prime Minister Edi Rama stated that while the pension reform implemented in 2014 has been successful, modifications are needed without altering the fundamental structure of the scheme. He also confirmed that the government will maintain its policy of providing pensioners with two annual bonuses.

Why is this important: The pension system introduced by the Socialist government in 2014 marked an improvement compared to the previous scheme, but also created significant imbalances. Pensioners who retired before the reform receive considerably lower pensions, which are insufficient to sustain a dignified standard of living. Under the reform, the maximum pension was capped at twice the base pension, and pensions were limited to 75% of the net salary from the lowest-paid three years within the last decade. In contrast, those who retired after 2014 have their pensions calculated based on total contributions without any cap. Addressing these disparities has become a pressing issue for pension reform.

Context: Prime Minister Rama has stated on multiple occasions that pension increases will be implemented only after extensive consultation. He assured that the reform would take place before the end of his fourth term in office. Unlike opposition parties, which have made promises for immediate pension hikes, Rama cautioned that revising pension schemes requires time and careful planning.

“Reforming the pension scheme is a marathon, not a sprint,” said Rama. He criticized those making broad promises for pension increases, arguing that such moves ignore expert advice and could lead to long-term financial instability. According to him, rash decisions on pensions would mean “turning our backs on experts and rushing blindly into disaster.”

Last year, the government launched a communication campaign to raise awareness among employers about the importance of declaring real wages and paying full pension contributions. Companies were warned of penalties for violations. Rama noted that the initiative has already shown results, with a notable increase in declared wages and contributions at the start of this year. However, he acknowledged that there is still significant room for improvement in strengthening the Social Insurance Fund.

What else: The issue of wage underreporting and informal employment was also raised by Xiaoqing Yu, the World Bank’s Director for Southeast Europe. She emphasized that while the 2014 reform improved the pension system, challenges such as emigration, informal labor, and under-declared wages continue to undermine its effectiveness. Yu also noted the importance of developing complementary private pension schemes to support the system.

Currently, 826,928 individuals contribute to the pension scheme, with revenues accounting for 6.73% of Albania’s gross domestic product (GDP).

Next steps: The government will continue discussions with experts and international institutions to finalize a plan for pension reform. The focus will be on addressing existing disparities while ensuring the long-term stability of the system. Any changes are expected to be implemented before the next parliamentary elections on May 11, 2025.