Transcript Kosovo1 Pension System 1 All references to Kosovo, whether to the territory, institutions or population, in this text shall be understood in.

Kosovo1 Pension System
1 All references to Kosovo, whether to the territory, institutions or population, in this text shall be
understood in full compliance with United Nation Security Council 1244 and without prejudice to the
status of Kosovo
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FACTS ABOUT KOSOVO

Area - 10,887sq Km

Population – 2.1 million

GDP - €3.8bn

Growth Rate in 2008 5.2%

GDP per capita € 1,797

Inflation in 2008 9.4%

Labor Workforce - 832,000

Unemployment Rate - 43%

Ratio of elderly to working age 0.16 - or 6.2 workers for 1
retiree
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INTRODUCTION

Previous-PAYGO solidarity system

Reform begins in 2001
- Avoiding the creation of old socialist system.
- Sustainability
- Coverage
- Complete interruption of old pension system
- Universal concerns regarding pension reform
- Solid technical expertise from WB, USAID etc
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THREE PILLAR SYSTEM
1st Pillar: Basic Pensions
Participants: Elderly over 65
Financing: General Budget Revenues
Provider: Ministry of Labour and Social Welfare
2d Pillar: Individual Savings Pensions
Participants: All employed-Mandatory
Financing: 10% of Wages
Provider: Kosovo Pension Savings Trust
3d Pillar: Supplementary Pension Schemes
Participants: No restrictions
Financing: Voluntary Contributions
Providers: Employers / Financial Institutions
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 Basic and contribution scheme (15 years of work experience)
 Disability pensions scheme
 Trepça mining pension scheme
 War invalids and their families pension and benefits scheme
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 It is a general non contributory scheme financed from the State
Budget
 All residents of 65 years of age are eligible
 There are two categories of beneficiaries:
- Beneficiaries fulfilling the age criteria (110.000) at 45 EUR per
month
- Beneficiaries fulfilling the age and work experience (15 years)
criteria (28.000) at 80 EUR per month
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 Disability pensions are paid to persons of 18 – 64 years of age
 The criteria is 100% disability
 20 000 beneficiaries earn 45 EUR per month
 Trepça mining scheme is dedicated only to underground miners
 4650 beneficiaries earn 50 EUR per month
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WAR INVALIDS
AND THEIR FAMILIES SCHEME
 Who benefits?:
- War invalids
- War invalids custodians
- Civil war invalids
- Martyrs families
- Families of the missing from the war
•
Currently there are 11.700 beneficiaries from this scheme
•
The amount can vary depending on the level of disability and the
number of people killed or missing during the war (from 54.60
EUR to 351 EUR)
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PILLAR II (KPST) DETAILS
 Originally mandatory for all workers between ages of 18-55
 Minimum 10 year window to create savings- hence 55
 Payments are made at age of 65 (invalidity and death exceptions)
 10% minimum contribution chosen because:
- Reasonable replacement for mandatory system (complement
basic pension)
- Large enough to attain in economies of scale and
- Keep overall taxes low enough and avoid shadow economy
 At retirement a contributor must purchase an annuity
 Currently KPST administers a phased withdrawal scheme
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KPST – FACTS
 Nr. of participant accounts - 270,000
 Assets Under Management - €250 mil (6.5% of GDP in 6 years)
 5,967 benefit payouts amounting €6 million were paid out
 Account Statements sent to contributors annually
 Call services
 20 Staff members
 Online account information
 KPST original administration fee was set at 1% of total assets,
reduced at 0.9% for 2008
 Highest cost are asset managers, staff salaries and account
statement print and deliveries
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KPST MANAGEMENT
 Board of Governors
- 8 members, 4 professionals with 10 years experience in
finance or economist/pension scholar; 4 representing
employers, employees, the government and International
Civilian Representative
 Fiduciary responsibility
- Solely in the interest of participants-no one else
 Regulatory authority
- Regulator is central bank with far ranging powers
 Collection of contributions
- Collection of pensions done through Tax Administration due
to their enforcement capabilities and low cost
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COLLECTION PROCESS
Information
Flow
Tax Administration
Kosovo Pension Savings Trust
Database of Employers
and Employees
Individual Pension Savings Accounts
of Participants
Employer
Employees
Money
Flow
Banks
BPK
Collect and Process
Payments
Accumulates Transfers
from Banks
Asset Management
Companies/Custodians
Invest Pension Assets
BPK (Central Bank)
Monitors Performance of Banks, Asset Managers, and
KPST
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INVESTMENTS OF ASSETS
 Regulatory requirements
- Security of pensions,
- Diversity,
- Maximum return and
- Liquidity
- Stocks, government bonds and certificates of deposit
- Only CD are existent in today’s market in Kosovo hence small
portion is invested in Kosovo (5% of total Assets)
 Investment policies
- In the beginning only extremely conservative investments were
pursued in order to avoid any losses at an early stage
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KPST UNIT PRICE
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INVESTMENTS
Currency, 5.02%
Money MarketsCash, 6.84%
Stocks
Fixed Income
Money Markets-Cash
Currency
Fixed Income,
32.95%
Stocks, 55.19%
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REPORTING AND EXPENDITURES
 Regulatory requirements
- KPST must sent account statements once a year to all contributors
- Correct address is a major challenge since 15% don’t get delivered
- Main reason streets have changed names at least 4 times in the
past 10 years
 Expenditures
- KPST original administration fee was set at 1% of total assets,
reduced at 0.9% for 2008 and 0.8% for 2008
- Out of this fee all admin cost are paid including asset managers
- Highest cost are asset managers, staff salaries and account
statement print and deliveries
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THANK YOU FOR YOUR
ATTENTION!
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