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Year 2023, private pension funds slow down

2024-03-18 13:42:36Biznes SHKRUAR NGA REDAKSIA VOX

Year 2023, private pension funds slow down

The expansion of private pension funds with new members slowed last year.

Data from the Financial Supervision Authority (FSA) show that the total number of members reached 38,180, an increase of 4.55% compared to the previous year.

During 2023, 1662 contributors were added to private pension funds. The rate of increase in the number of members has almost halved compared to 2022.

The modest growth of the market, taking into account the rather low level of penetration of private pensions in society, shows that the expansion of these schemes may need more incentives.

In a decade, the number of members of pension funds has increased by almost five times, but this growth has come on a very low basis and the rate of employee participation in these funds remains quite modest. The number of individuals contributing to a private pension accounts for less than 3% of the total number of employees in the country.

In November last year, the new law "On private pension funds" entered into force, which will bring a significant increase in fiscal incentives for contributions to private pension funds.

With the previous law, the maximum limit for tax benefits on contributions to private pensions is the smaller value, resulting from the comparison of the amount of 200,000 ALL and 15% of the member's gross annual income. According to the new law, the maximum monthly limit of the tax exemption will be increased up to the level of the approved minimum salary, which has currently reached 40 thousand ALL per month.

Since the tax exemption is linked to the minimum wage level, it is expected that this incentive will increase even more in the coming years. With the current level of the minimum wage, the amount of tax-exempt contributions would reach 480,000 Lek per year today, or 140% more compared to the current threshold of 200,000 Lek.

Contributions and private pensions paid by the employer in favor of the employee will also be exempt from tax to the same extent.

The law also provides that pensions are not taxed in the benefit for the part of the contributions, but only for the return on the investment, provided that the withdrawal is made with monthly payments spread over at least two years and not immediately, after fulfilling the legal conditions for private pension benefits.

Last year, market growth slowed even as measured by funds' net asset value. Their value at the end of 2023 reached 6.7 billion ALL or almost 65 million euros, increasing by 18.2% compared to the previous year. For 2022, the growth of net market assets had been 24.3%. Fund assets are mainly invested in Albanian government bonds.

There are currently six private pension funds in the market, managed by four management companies.

According to the number of members, the largest actor in the market at the end of 2023 Credins Pension, with about 49.38% of the total number of members, followed by Sigal Pension with 29.45%, Albsig Pension with 10.68%, Raiffeisen Pension with 9.93% , Smart Pension, with 0.51% and Sigal Pro, with 0.06%.

Compared to a year ago, the largest fund Credins Pension has suffered a slight decrease in market share, while other funds have gained ground, including the two funds that started activity in 2023, Smart pension and Sigal Pro.

In terms of net asset value, the largest fund is Sigal Pension with 41.29% of the total, followed by Credins Pension with 30.38%, Raiffeisen Pension with 20.73%, Albsig Pension with 7.33%, Smart Pension with 0.26% and Sigal Pro , with 0.01%.

In the division of the market according to the value of assets, the two funds administered by Albisg Invest, Albsig Pension and Smart Pension, have seen growth, while other investment funds have suffered a decrease in their market share.


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