ALBANIAN PENSION SYSTEM: FUTURE CHALLENGES

Abstract

This study analyses the reforms and development of Albanian pension system during the last two decades. The structure of Albanian 
pension system is composed by three pillars: 1- Compulsory scheme (PAYG), 2- Second pillar, compulsory and private and 3- Third pillar, 
on voluntary base but actually the PAYG is the most dominant. In the literature review regarding Albania, but not only, there are 
recommendations regarding the functioning of other pillars in order to overcome the problems faced in the actual system. On the other 
side, there are some new views regarding the problem of interest rates used in the calculation of pension’s benefits.  These new ideas 
come as solutions to the questions raised after the financial crises. Based on these discussion, this study will suggest some possible 
solution for the establishment of new pension system including the Albanian one.   
JEL CODES: H55, D91 
KEYWORDS: RETIREMENT, PENSIONS, AGEING, OVERLAPPING GENERATION 
“Pensions are doomed whatever the government does. Whether interest rates go up or whether they go further down, the 
pensions are at risk. In the case of rising interest rates their value will be decimated. In the case of falling interest rates pension 
contributions will not be able to earn a return necessary to accumulate the capital needed in order to pay defined-benefit 
pensions in the future.”