Albania is facing an increasingly pressing issue within its retirement system. Pensioners who have not met the required years of employment and are unable to access a full retirement pension are growing in numbers at an alarming rate.
Official statistics from the Social Insurance Institute reveal that, in 2022, partially paid pensioners accounted for 48% of all individuals receiving retirement pensions, an increase from the 45% reported in 2021.
In 2022, the country had a total of 481,420 retirement pension recipients, with 231,734 of them receiving partial payments.
While the overall number of retirement pensions saw a yearly increase of 4.6%, those receiving partial pensions surged by 12%. This rapid rise in partial pension recipients highlights a concerning trend – the elderly population is increasingly vulnerable to poverty, exacerbated by the high inflation experienced in the past two years.
Albania’s social insurance system permits individuals who have not fulfilled the mandated years of employment to receive a partial retirement pension. This means that they will receive a pension based on the number of years they have contributed to the system, but not less than 15 years in total.
Individuals who have a history of contributing to the system have the right to receive a partial retirement pension once they reach the age of 65 for men and 60 for women. According to the Social Insurance Law, they must have at least 15 years of insurance contributions, no more than 35 years of insurance contributions, and must have withdrawn from economic activity.
While the increase in partially paid pensioners has eased the strain on the public pension system by reducing overall expenses, it has also given rise to a significant social issue concerning the financial sustainability of the elderly population.
Challenges related to the transition period and a high prevalence of informal employment in the labor market have resulted in progressively lower pension amounts year after year.
Experts argue that a substantial portion of pensioners newly entering the system have worked in the informal sector and do not meet the criteria for a full pension. This is further reflected in the declining average years of work for these newly enrolled pensioners.
Furthermore, experts emphasize that the new pensions are beginning to reflect the challenges associated with the transition period, particularly those related to informal employment. Individuals who have consistently made contributions and meet the criteria will have higher retirement incomes compared to the old system that was in place before 2014. However, those who have not contributed appear to face repercussions during retirement, as payments under the new pension reform, initiated after 2014, are directly tied to their contributions.
Albania’s pension levels remain below the relative poverty threshold, currently at 6.7 US dollars per day or approximately 201 US dollars per month.
In 2022, the average pension in urban areas amounted to 180 US dollars per month, which is equivalent to 90% of the poverty threshold, while the average pension in rural regions was 105 US dollars per month, representing 52% of the poverty threshold.
According to definitions provided by the Institute of Statistics (INSTAT), which adhere to international methodology, a pensioner is considered impoverished if their monthly payment falls below half of the national average wage. In 2022, the average pension in urban areas reached 44.4% of the average net wage.
