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Private pensions, penalty if you withdraw before the deadline

2024-03-06 13:44:09Biznes SHKRUAR NGA REDAKSIA VOX

Private pensions, penalty if you withdraw before the deadline

Although it entered into force in November 2023, the law "On private pension funds" is still not being implemented in reality, as it is being completed with the relevant by-laws. Recently, the Financial Supervision Authority (FSA) issued for public consultation the regulation "On determining the penalties applied in the case of premature withdrawal from the private pension fund".

In Article 4 of this document, the penalty measures are defined. The management company keeps the individual no more than 15% of the assets withdrawn, for each premature withdrawal made in the time period from the date of the first contribution, up to 5 years, including the 5th year. This penalty measure will be applied to management companies that apply an annual management fee of up to 1.5% of the net value of the fund's assets. In cases where the annual administration fee is over 1.5% to 2.5% of the assets, the penalty measure will be no more than 10% of the withdrawn assets.

On the other hand, for any premature withdrawal made in the time period starting after 5 years to 10 years from the date of the first contribution, including the 10th year, the penalty will be no more than 10% of the assets of drawn. In cases where the annual administration fee is over 1.5% to 2.5% of the assets, the penalty measure will be no more than 5% of the withdrawn assets.

This regulation also defines the methods of calculating the penalty, as well as the obligations for informing the client on the part of the administrative company. In Article 7, point 2, it is emphasized that, upon receiving the request for early withdrawal from the pension fund member, the management company must clearly explain with written examples the financial consequences caused by the termination of the membership and premature withdrawal from the private pension fund.

In the meantime, the member has the right not to pay a penalty in the case of premature withdrawal, if the management company has not informed him of the conditions and the amount of the penalty, according to the provisions of the law and this regulation.

The new law "On private pension funds" aims, among other things, to encourage citizens' participation in the scheme through fiscal incentives. The maximum monthly limit of the tax exemption increases up to the level of the approved minimum salary, which is currently recorded at 40,000 ALL per month. From this incentive, the amount of contributions exempted from taxes reaches up to 480 thousand ALL per year or 140% more compared to the threshold that was set in the old law of 200 thousand ALL.

According to the latest data available from the AMF, during the period January-September 2023, five funds operated in the private pension market. The market registers a total of net assets of 6.5 billion ALL and an increase of 13.75% compared to the end of 2022. The number of members in private pension funds at the end of September 2023 was 38 thousand members.


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