Albania's second pillar is as good as ready

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  • Albania's second pillar is as good as ready

ALBANIA - There is a political consensus in Albania by the two major parties to introduce a mandatory second pillar pension - but experts say it will have to wait until after the elections in autumn 2009.

The South European country, with three million inhabitants, currently has only a struggling voluntary pension pillar with three licensed companies managing only €1.5m-€2m.

"Older employees are still relying on the government to pay their pensions but there are demands from young people for the possibility of saving privately for their retirement," explained Christian Canacaris, board member at Raiffeisen Albania, a subsidiary of the Austrian group Raiffeisen International.

Very low average salaries of around €200 per month prevent Albanians to save much, he noted, even considering taxes are quite low.

However, young people in particular are investing in real estate in the hope the value will increase to offer them some form of private retirement provision, Canacaris said.

"It is not the same for the young generation, because they are better educated and many of them have been abroad. They want to save for their retirement privately."

Albania is facing the same demographic challenges as other European countries and Canacaris is convinced the introduction of a multi-pillar system is unavoidable.

Indeed, both major parties - the conservatives which are in power and the largest party in the opposition - agree on the subject and are committed to introducing a second pillar some time after the election.

The existing pension funds do not have many domestic investment opportunities as the Tirana stock exchange is only about to get a major boost once Albanian companies begin listing bonds soon.

Canacaris in convinced there will be a reciprocal effect between a growing stock exchange trading and the development of pension funds.

Raiffeisen is itself thinking about joining the pension business in the country but buying an existing company might be the only option at the moment unless the government gives out any more licenses , the bank's board member confirmed.

"Once the pillar II is available in Albania, the revenue potential for the business will increase, but also pricing of these companies will increase as well. Thus, it seems to be a good timing to buy a company now before the upcoming elections," he noted.

Raiffeisen is said to be "by far the largest retail bank in the country" with a large client base which Canacaris believes would be a good position from which to enter the pension market.

Such thought follow the International Monetary Fund's (IMF) latest report on Albania, which  welcomed plans to introduce a multi-pillar system but also issued a warning.

"Staff recommend caution with regards to the move to a multi-pillar system for pensions," the IMF noted in its latest poverty reduction strategy paper

"In many other countries, this has had a significant impact on the budget because of transition costs. Staff recommend emphasising the need to focus the first stages of a
pension reform strategy on improving the administration of the current system to generate cost savings, and changing the benefit system, by improving the links between contributions and benefits so as to raise revenues from the increased incentive to contribute," suggested the IMF.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email

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