Problems of social insurance system in Albania
Msc. Elton Guberaj, Dr. Bernard Dosti
The social insurance in Albania while covering the risks of short-term illness, maternity benefits, unemployment, and health costs, is largely focused on pensions. The pension system is the largest element of the social insurance system.
The Albanian pension system is organized according to the principle “Pay as you go”, which means that for old-age pensions, the person who retires does not take his individual contribution. The actual contributors contribute creating a fund which is used to pay the pensions. In other words “Pay-as-you-go” is a system in which the payroll taxes of the actual workers go to finance the pensions of the actual aged. When these contributors retire and pass on the beneficiaries’ side than there are other contingents of contributors that contribute on providing new funds and so on.
Albania, as many of the other transition countries, has seen an increase in in-formalization of the labor force, which has led to limited revenue from the payroll contributions while it faces the burden of supporting several generations of elderly, most of whom have full pension rights. The government has tried to raise the benefit level for the recipients of the lowest pensions, the rural pensioners, to equalize their pension levels with those of their urban counterparts.