WB: Three directions for short-term interventions in the pension scheme

2026-01-07 07:38:00, Ekonomi CNA

The World Bank suggests that improving the public pension scheme in the short term can be achieved without a complete restructuring of the system, but through a series of measures that address the current weaknesses of the contributory scheme.

Increase pressure on contribution payments

The Bank's main emphasis in the latest document "Enhancing Fiscal Sustainability" remains on increasing the number of contributors and the regularity of their payment as a basic condition for sufficient and financially affordable pensions.

One of the main problems of the scheme is related to early exit from the labor market or undeclared work. Data from the Social Security Institute show that for people who retired in 2022, the last average contribution was recorded in 2013, about nine years before retirement. This gap indicates the decline in labor market participation in the over-50s and the need for policies that encourage longer stays in the formal labor market.

The experience of OECD and European Union countries shows that training programs for adults and removing barriers for workers at the end of their careers can yield positive results, while for Albania a more in-depth analysis of the labor market for this age group is required.

For those who do not meet the conditions, social assistance should be increased, not pensions

Another risk to the sustainability of the system is progressive indexation or sharp increases in minimum pensions. These measures could undermine the perception of fairness in the system and reduce the incentive to contribute, reinforcing wage underreporting, which, according to the comparison of the ISS data with the Labour Force Survey, is already a widespread phenomenon. Instead of general increases, a more efficient approach would be to support low-income families through social assistance schemes, without distorting the logic of pension contributions.

Low coverage and weak enforcement of obligations also remain serious challenges. Despite high subsidies for rural workers, the number of active contributors in rural areas has fallen to only 25,000 people in 2022. Developments after the 2024 changes show that the social pension has discouraged contributions, while its abolition is not considered politically feasible. In this context, policies are expected to focus on better incentives, simplification of procedures, more effective communication and a review of voluntary schemes. Even private pensions, although they have increased significantly over the last decade, cover less than 3% of employees, mainly due to low flexibility and lack of short-term benefits, which makes them less attractive for migrants and informal workers.

Special scheme for immigrants

High migration remains a key factor weighing on the pension system. Over 2.2 million Albanian citizens live abroad, most of them of working age. This increases the old-age dependency ratio and reduces the contributory base. Experts emphasize the need for special social security schemes for migrants, to provide protection against other social risks as well. Although Albania has some agreements on the transfer of rights, better data coordination, long-term projections and more tailored voluntary schemes are required.

According to the World Bank, public education and communication on pensions also play an important role. The decline in years of contributions among young retirees indicates a lack of awareness of the link between contributions and pension levels. Tools such as pension calculators, which predict benefits based on individual contribution history, can increase transparency, trust and incentives for greater participation in the system, reinforcing its sustainability in the short and medium term./ Monitor