Statement by the Minister of Social Welfare and Youth, Blendi Klosi:
Yesterday’s decision by the government to increase pensions comes in the wake of our commitment to increase social insurance benefits, based on the envisaged results of the spectacular reform for pensions in our country.
We know that people expect more from us, we know that benefits should have been even greater, and we know also that there are categories who really expect growth to be greater. But all these need to be realized in view of a comprehensive reform, and as a results of a hard work aimed at having a social insurance scheme based on completely new principles in comparison with those we found. We must not forget even for a moment the situation in which we found the support scheme of social insurance, only some time ago.
Yesterday, the Council of Ministers adopted a decision to narrow the pensions’ gap, thus increasing pensions for thousands of retirees of the years from 1994 to 1996. These pensioners have been receiving for years the lowest pensions compared to the rest, even though they worked under the same conditions.
The reasons were different, but it was due mainly to the negligence and stagnation that prevailed in the old pension system; the uneven indexation of priority pensions and that of the increase of lower pensions, and the fact that the pension law since 1993 changed drastically the way of calculating pensions. In 1994-1995, full old-age pensions were at a minimal level, and accounted for 63% of the pension scheme. We have worked hard with the Social Insurance Institute to identify those groups that have not benefited equally from the scheme of social insurance contributions.
The beneficiaries will be:
People receiving full pensions, as provided for by points 31, 32 of the 1993 law “On Social Insurance”, who retired in the years 1993-1996, and whose pensions back then were 5% lower than other pensions.
Seniority pensions for former military officers, determined under Article 40 of Law 4171 of 1996 “On Social Insurance in the Republic of Albania”, will be reviewed.
The retirement pensions of underground workers who were employed until 1995 and had met the insurance period, regardless of their age and requirements. They also received a lower retirement compared to other beneficiaries of the same level.
Pensions of former employees, women in education and culture, who had early retirement until 1994, and had completed not less than 22 years and 6 months, received a retirement pension for only 60% of the salary of the time. They were also unbalanced compared to the benefits realized.
Therefore, following yesterday’s decision of the Council of Ministers, the pensions of 19.655 pensioners will be recalculated. Of these 19.655 beneficiaries, 10.355 are pensioners who retired in the years from 1993 to 1996, and receive an average of 8.400 ALL per month; 500 former military personnel, receiving an average of 5.000 ALL per month; 8.800 miners and teachers who already receive a complete retirement pension, with an additional average amounting to 40 thousand ALL (old currency) per month.
The financial effects of this calculation will amount to 324.1 million ALL (or 3 billion and 244 million ALL of the old currency) in the remaining 6 months of 2016 only.
The financial effects will all be faced by the positive results of the support scheme for pension contributions at the ISI for this year and last year. This positive result comes from the successful implementation of the pension reform, which has created the opportunity to increase pensions, adjust all mistakes of the past, and create a more solid basis for increasing pensions in the future.
Last month only, as a result of this reform and of the contribution made by the whole system and all those who have been added in the scheme of contributions, the government and parliament wrote off liabilities amounting to 1.4 billion ALL (new currency), for 6.500 former military personnel.
In addition, thanks to the law on lowering retirement age for miners, 8.800 people have benefited, with a financial effect of over 400 million ALL.
For the past year, the legal indexation of pensions has been done for the first time, with 630 thousand benefiting pensioners.
These and many other measures implemented also in the process are associated with the serious commitment of the government and the executive structures for the reform of the social insurance system. As we all know, the social insurance system in Albania, modelled since 1993, was based on the inclusion in the scheme of economically active persons, by means of the payment of contributions and their funding which was not made according to their contributions, but under a scheme that does not allow further growth. Therefore, the system had many problems until 2013. First, it was on the verge of bankruptcy, and the scheme of contribution coming from the state budget contributions was in an inverse ratio of 45%. The scheme was about to collapse.
The old system would create unjustified differences between different groups of pensioners. Pensions were drastically low. The dependence degree of the system was very problematic. The number of insured persons for every pensioner resulted to be at a level 1.2 to 1 , which was totally unacceptable. Evasion of payment of contributions by employees and self-employed in urban areas and by farmers was very high, and there was no interest in paying contributions, because the pension ceiling was fixed, and therefore nobody was interested in paying according to their contributions.
The new reform implemented last year, from 2015 onwards has brought and achieved the following:
Fairer benefits for all, also in proportion to the size of contributions of everyone to the scheme, deepening the contributory principle of everyone;
An acceptable coverage degree for the population with social insurance elements, as well as the coordination of this system with economic aid, contributing in order for all to have greater benefits;
A thorough reform of the rural pension scheme, by reducing contributing subsidies to the possible smallest measure and in the shortest time, and by granting deserved pensions based on equal contributions;
A sustainable improvement of the financial system, in addition to guaranteeing the deserved benefits, the reform of the supplementary insurance scheme, a new and real formula for the calculation of pensions, thus uniting the two schemes, the urban and rural one;
Focus on the completion of the administrative reform for the modernization of social insurance systems, and for redefining the objectives of the collection system of contributions;
The launch of the social pension scheme which did not exist before in our country and which will cover all the elderly who have reached the age of 70, and who for various reasons have failed to meet the minimum 15-year period of contributions, and have no other income from properties, inheritance or investments. Thousands of pensioners benefit today the social pension scheme which was not calculated before.
All these were calculated based on the contributions of many people who have been added also as a result of the fight against informality. During the year 2014-2015 only, over 200 thousand contributors were added to the pension scheme, thus increasing by 17% in each year the pension contributions. The dependency ratio of the system improved significantly, which shows the ratio between beneficiaries and contributors. In 2013, this ratio was 1.02 beneficiaries for one contributor, while today, in two years only, the scheme has had a radical change, increasing the number of beneficiaries to 0.98 for one contributor. So, from a scheme that was about to collapse, it has turned into a scheme that can be reformed.
Just by looking at the figures of the budget, in 2013 the transfer of the state budget accounted for 46.4% of the total budget of social insurance, while in 2015, it accounted for 43.7%, and for 2016 it is envisaged to be only 39.7%.
We brought all these to your attention, to tell once again that we know that we have a lot to do, we know that people and citizens expect much more from the social contribution scheme. But we are also very confident that the reforms we have undertaken, the new pension scheme, the increased number of contributors, the fight against informality, make it a winning scheme. A scheme that gives the Albanian state, the state budget, the Albanians politics, the opportunity to have a right policy to increase pensions, to have a right policy for the rehabilitation of irregularities recorded in many years for entire groups of pensioners who have been the victim of a vicious political system in the pension system.
