Demographic trends in the country are unfavorable. With a share of 20 percent of the adult population over 65 years old, Macedonia is also according to the European definition in the group of countries characterized demographically as countries with an old population. But our adult population does not have a "pink standard". In Macedonia, according to the latest data from the PIOSM Fund, there are 337.871 pensioners, and the average pension is MKD 22.187. However, according to the income structure, as many as 126.168 pensioners, or 37,3 percent, have a pension of up to MKD 16.909!

Precisely because there are pensioners in the country with pensions that cannot survive, the new government announced a linear increase in pensions, twice by 2.500 denars, once in September and once in March next year. And while the Ministry of Finance has calculations according to which the linear increase in pensions will cost an additional "only" 3 million euros per month in relation to the legal adjustment to the cost of living and the growth of wages, the Fiscal Council and experts warn that the hole that must be deepened will deepen. to be patched up with money from the state treasury, due to insufficient funds from pension contributions.

At what cost will the pension standard be saved?

According to the Law on Pension and Disability Insurance, the reconciliation of pensions is done twice a year, on the first of March and on the first of September.
"The adjustment of the old-age pension is carried out according to the movement of the index of the cost of living in the amount of 50 percent and the increase of the average salary paid to all employees in the Republic of North Macedonia in the amount of 50 percent", it is written in the Law. The regulation also explains that for the March reconciliation, the data from the second half of the previous year is taken, and for the September one, the data from the first half of the same year.

The Minister of Finance, Gordana Dimitrieska-Kochoska, says that according to this model, pensions from September should increase by 9,35 percent. The current monthly amount allocated for pensions is MKD 7,1 billion.

- With the harmonization according to the law, an additional 664 million denars should be set aside for pensioners per month. And for the linear increase of 2.500 denars for each pensioner, 845 million denars should be set aside for the monthly new - the math Dimitrieska-Kochoska revealed.

With the rebalancing of the Budget, which is in the parliamentary procedure, an additional 5 billion denars are provided for the payment of pensions until the end of 2024.

- Out of those 5 billion denars, 2,5 billion denars are funds that are transferred additionally to the Pension Insurance Fund in order to realize the announced linear increase in pensions by 2.500 denars from September 2024, which will be paid out in October - they explained to "Sloboden press" from the Ministry of Finance and add that no money was foreseen in the budget even if it would have been managed according to the alignment in accordance with the law.

According to their calculations, 34,5% of the total budget of PIOM is transferred from the Central budget to the budget of PIOM on all grounds, the remaining funds are provided by PIOM from its own sources of income, that is, social contributions of salaries.

Gligor Bishev, president of the Fiscal Council, says that precisely because of the fact that even now a significant part of pensions cannot be covered by the pension contribution, an increase in pensions of 5.000 denars can significantly deepen the deficit in the pension fund.

- The Fiscal Council proposes, if an increase in pensions is approached above the prescribed rule, that the measure for pensions be accompanied by other measures, which should enable an increase in the income side of the budget and the pension fund, such as measures to increase the age at retirement that will be in line with the increase in life expectancy of the population and the need for skilled labor, improving the collection of contributions and taxes, suppressing the gray economy and considering the possibility of increasing the rate of pension contributions considering that it is at a moderate level in relation to the countries of the region - says Bishev.

 Pension is not a social category

The Party of Pensioners, which is now in opposition, says that they are not against incidental leveling of pensions, but that this must not be a practice.

- Pension is an economic, not a social category. Depending on how much money each individual has paid as a pension contribution, that will be the amount of their pension. A linear increase in pensions is not fair, and it is not even legal, but of course, the law can change. However, I would say that such an incidental linear increase in pensions is good in order to level out those with the lowest and highest pensions and to improve the living standards of pensioners on lower incomes. But if something like this happens all the time, then the pensions of one farmer and one university professor will approach - Ilija Nikolovski, president of the Party of Pensioners, told us.

According to the data from the PIOM Fund, the lowest personal pensions are MKD 13.152 and they are for older pensioners who have exercised their pension right since January 1, 1997. Then the percentages for calculation were changed, so those who retired in the year before them, have the most favorable and lowest pension of 16.144 denars. For pensioners exercising their right from January 1, 2002, the lowest pension is MKD 13.852.
Since there are also family pensions, where the pension is inherited from the deceased, as well as disability pensions, there are as many as 22.972 beneficiaries in the country, or 6,8 of the pensioners with pensions of up to 13.192 denars!

However, Nikolovski explains that with the average of 22.187 denars, we are not lagging behind the countries in the region.

– Compared to the region, our pensions are not the lowest, as is usually shown. Thus, according to data from Eurostat, the Macedonian average pension is 342 euros, the Bulgarian one 226, in Albania the average is 131, in BiH 237, in Serbia 383, and in Montenegro 291 euros - says Nikolovski.

He says that the Party of Pensioners has been proposing a minimum pension law for a long time, as well as social packages from the state's social fund, and not from the PIOSM Fund intended for the most vulnerable pensioners. But in doing so, says Nikolovski, their mapping should be done, so that not only the amount of the pension will be taken into account, but the total income, because a pensioner may have a low pension, but a large property that he rents.

And university professor Jadranka Mršić, who is one of the creators of the three-pillar pension system, says that "solving the problem of small pensions and achieving decent incomes and living conditions for pensioners is done through other measures for social protection or through the introduction of another - zero pillar for a state general pension that is paid to all citizens, and the amount is determined by the state and covered by the general budget".

– The state designs the pension system in a way to ensure adequate pensions and financial sustainability of the pension system, and it should fulfill these two goals in a complementary way, that is, not to jeopardize one at the expense of the other goal. Decisions about the pension system should be consistent and comprehensive, not one-off and to satisfy other goals. The financial sustainability of the system depends on the payments to the pension fund and the amounts for the payment of pensions; if one side moves negatively, it will affect the other. Incomes depend on the state of the economy, through the number of employees and the amount of salaries, and the costs are affected by the number of retirees and the amount of pensions, so with additional interventions in the system through an unjustified increase in pensions, the projected balance of the system is violated - statements about " Free press", Mršić.

How does the pension system work and can it continue?

All employees after 1.1.2003 are mandatory members of the second pension pillar. Two-thirds of the pension contribution goes to the state fund, and one-third to the mandatory private fund of the insured's choice. The current rate of pension contribution is 18,8 percent, but when the two-pillar pension system was conceived, the rate of pension return was 21,2 percent. According to Eurostat data, Macedonia is the country with the largest increase in the participation in the population of people over the age of 65 in the period from 2012 to 2022 among European countries. The good news is that the ratio between insured and pensioners has improved. If in 2003 it was 1,3, according to the latest data for 2022 it reached 1,7 when 572.327 employees paying pension insurance financed 334.816 pensioners. The bad news is that this ratio of 1,7 employees to one retiree is a deterioration from previous years. For example, in 2015 and 2016, the ratio was 1,9.
With such changes in the parameters, the question arises: Should there be a new reform of the pension system.
Professor Jadranka Mršić says that the pension contribution rate should be reviewed, but also serious challenges affecting the functioning of the pension system should be addressed.

- The aging of the population is one of the factors affecting the long-term financial sustainability of the pension system, thus increasing the costs of the pension fund. Since the establishment of the three-pillar system, accelerated changes are taking place in the economy and in society, which, if not treated appropriately, can significantly disrupt the stability of this system. A major problem is the high rate of immigration which reduces the future available labor force causing an expected lower inflow of contributions to the pension fund, and this must be taken into account as soon as possible. Next is the unchangingly high level of the gray economy, which also negatively affects the income of the pension fund. And the low productivity, which is directly related to the salary level, directly affects the income of the fund. There is no time to delay dealing with these threats, a complex of initiatives and measures are needed in the field of education, the labor market, preventing the gray economy, retaining the young workforce, investing in infrastructure, stimulating technological progress, encouraging the growth of small and medium enterprises. And an increase in the pension contribution rate should be seriously considered, which is at a lower level than the rate with which the projections for the three-pillar system were made and is lower than 23,6%, which is the average in European countries - he told us Mršić.

The number of pensioners, on the other hand, is constantly increasing. If in May it was 337.871, in January there were 765 less pensioners. An aging population, combined with the exodus of the young population, produces a disastrous formula for filling the pension coffers.

- The decrease in birth rates, fertility and the increase in the age limit of the population are global problems that we are also facing. Our country is aging, and we have less and less young population, which is reflected in the decrease in the number of students, both in primary and secondary schools. This means that in the future our working population is decreasing. On the other hand, we have the so-called "brain drain". That means we are losing the skilled population. It will create a problem for us in education, in health, in the technological development of the country. It is a trend that leads to having fewer employees and generating less income, which in turn will directly affect the filling of the state coffers. At the same time, in recent decades, an average of 30.000 young people have moved out every year. The share of the adult population in the total population is already 20 percent, which means that we are a country with an old population. These are serious problems and great challenges to solve - said demographic expert Doncho Gerasimovski.

He says that a serious demographic strategy is needed. The new government is establishing a completely new ministry, social policy and demography, which will have to implement the National Plan for Demography, as one of the key commitments of the winning coalition in the last elections and in the VMRO-DPMNE program.

With this text, the Free Press joins the initiative for increased transparency of the institutions that the Institute for Communication Studies implements in cooperation with the media within the "Use Facts" project, which is supported by the British Embassy.