Pension system is not able to cope with demographic challenges, study

Moldova, as other Southeast European countries, experiences a rise in the number of pensioners at a time when the number of those who contribute to the social insurance system decreases. According to a study made by Friedrich Ebert Foundation, the current pension system of the PAYG type (pay-as-you-go) is not able to cope with the demographic challenges, Info-Prim Neo reports. In a news conference held to present the study, one of the authors Viorica Antonov, an expert in social policies and development, said that Moldova’s population is ageing and this fact endangers the sustainability of the public pension system, while the demographic forecasts say the risk of a social funds crisis increases. In order to avoid such a crisis, alternative funds should be immediately identified to guarantee additional incomes to the state pension. The postponement of the pension system reform will hamper the resolving of social and economic problems generated by ageing, say authors of the study. According to specialists, there should be created a multi-pillar pension system that will have at least three components: I – the public pension system, II – the mandatory privately-administered pension funds, and III – optional private pensions. Moldova has a public pension system. The authors consider that this system is imperiled by such factors as: the budgetary deficit, the migration of labor force, the rise in the number of pensioners, the demographic decline, etc. The inclusion of the second pillar may offer additional safety and a better income after retirement as every pensioner would receive a pension of at least the same size as the contribution, say the specialists. The second pillar will depend on a number of factors, including the efficiency and transparency of the non-banking financial sector, introduction of fiscal stimuli by the state, the size of pays and combating of illegal salary payment schemes. As to the implementation of the third pillar, Moldova does not yet have an appropriate legal framework. Modern infrastructure is needed for the optional private funds. The study “Towards a sustainable pension system in Moldova” forms part of a wider social problems analysis project implemented by Friedrich Ebert Foundation in Moldova. The authors of the study are a group of national and foreign experts.