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Pension scheme deficit improving, how are expenses being kept under control?
2025-05-27 16:37:55 / EKONOMI&SOCIALE
The social security scheme has collected more, while being more frugal in spending by 2024, thus reducing the “deficit” gap covered by the budget. Official data from the Ministry of Finance show that the social security scheme deficit (revenue from contributions minus pension expenses) reached -1.9 percent of GDP, remaining at the same level as last year but much lower than the 3.2% of GDP in 2016.
Higher contributions are a key factor in curbing the increase in the pension scheme deficit. They reached 139.4 billion lekë by 2024, or 10.5% more than in 2023, while the number of contributors increased by 2%. The average gross salary increased by 11.2%, boosting collections from contributions that are collected on top of gross salaries.
On the other hand, the increase in pension scheme spending was more modest in 2024. Pension indexation was only 4.1% in October 2024, much less than the 8.6% level in 2023. As a result, the actual spending of the insurance scheme was slightly lower than planned.
Savings on the expenditure side of the scheme are being driven by lower benefits for new pensions. Failure to meet pension eligibility criteria, especially years of insured work, has led to the vast majority of old-age pension beneficiaries receiving partial payments.
The pension scheme deficit was 49 billion lek or 500 million euros last year. This value was 8% higher than in 2023, but 14% lower than in 2022. The increase of about 4% in GDP in value has reduced the expenditure ratios for several items that have the same net values as in 2023.
If the 50,000 lek minimum wage increase continues as planned next year and digitalization strengthens formalization, revenues could continue to improve the deficit. However, demographic developments with an aging population leading to increased retirements will put pressure on spending.
Labor market pensions, such as emigration and high informality, are narrowing the contribution base. Reforms to the pension scheme developed over the last 30 years do not address the essence, demographic structure and informality of the labor market. A pension reform is currently being drafted, but it has stalled due to the general elections./ Monitor
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