Partial pensions "save" the budget from the cost of subsidies

2025-07-07 07:36:00, Ekonomi CNA

The budget subsidy for the public pension scheme is declining both in value and as a percentage of GDP year after year, significantly easing the state budget.

In 2024, the revenues of the Social Security Institute reached 175 billion lek, of which 139 billion were direct revenues from contributions and the remaining 38 billion lek was covered by the state budget as part of legal obligations arising from supplementary schemes, miners', village schemes and others arising from the social security law.

On the other hand, the total expenditures of the State Institute of Social Security in 2024 reached 188,626 billion lek. According to official data from the State Institute of Social Security, the deficit covered by other taxes in the state budget reached 13,5 billion lek or 0.5% of GDP, a historically low level.

In 2015, the pension scheme subsidy was 26 billion lek or 1.82 percent of GDP. Between 2015 and 2024, the budget subsidy for the pension scheme has halved in value and has decreased by more than three times in relation to GDP (see attached chart).

The pension scheme subsidy is the amount provided by the state budget to cover the financial deficit of the social security scheme, namely pensions. In simple terms, this is the financial assistance that the government provides each year because the contributions paid by employees and employers and direct payments from supplementary schemes are not enough to pay the pensions due to pensioners.

The budget subsidy for the public pension scheme before the pandemic has remained above 27 billion lek each year, however, since 2022, a significant decrease has been observed, from 22.9 billion lek in 2022 to 14.6 billion lek in 2023 and further to 13.5 billion lek in 2024.

The decline in subsidies from the state budget came for two reasons. First, revenues from direct contributions have increased significantly in recent years due to the increase in the minimum wage, wages in the private and public sectors. From 2020 to 2024, revenues from direct contributions increased by 67 percent, or 550 million euros more.

On the other hand, the expenses of the scheme were kept under control despite the increase in the number of pensioners. For almost a decade, the new old-age pensions have been lower than the average pension as beneficiaries fail to meet the main criterion of years of insurance.

52% of pensioners did not receive full pension in 2024

The data shows that the pressure on the state budget for subsidizing the pension scheme has decreased significantly and the government has more room to distribute bonuses or for a percentage increase above inflation./ Monitor Magazine