A SS. P ROF. S UZANA B ORNAROVA P H D INSTITUTE FOR SOCIAL WORK AND SOCIAL POLICY FACULTY OF PHILOSOPHY, UNIVERSITY SS CYRIL AND METHODIUS SKOPJE, REPUBLIC OF MACEDONIA FINANCIAL (IN)SECURITY IN OLD AGE IN MACEDONIA: Implications from the Pension System Exclusion

CONTENTS Social protection system in Macedonia Demographic Trends, Pension Rights and Beneficiaries Pension system reforms Exclusion of older people from the pension system Pension income adequacy Pension system reforms in light of the OMC Social Assistance: Accessibility and Adequacy for the Non-pension Beneficiaries 2

SOCIAL PROTECTION SYSTEM IN MACEDONIA Contributory part of the system is referred to as social insurance: pension and disability insurance, health insurance and unemployment insurance. Non-contributory or tax-financed part of the system referred to as social welfare: social prevention, social assistance (SA), residential care, non-residential care and child protection. 3

Demographic Trends, Pension Rights and Beneficiaries Share of population 65+: 8.46% in 1994; 10.6% in 2002; 9.0% in 1996; and 11.2 in 2008 Number of pensioners: 66,224 in 1990, to 241,221 in 2000, and 276,663 in Dependency ratios: 1991 – 3 employees per pension beneficiary 1995 – – , 2005, 2006, 2007 – 1.3, 1.3, 1.6, 1.4 Pension rights: old age (54%), survivors (27%), disability (17%), agricultural (1%), military (1%) 4

PENSION SYSTEM REFORMS Parametric reforms since 1993 (mostly restrictive) Paradigmatic reforms since 2000: Introduction of the three pillar pension system:  1) mandatory defined benefit pillar (2000): PAYG; old-age pension when 64 (man) or 62 (women) and min 15 years of service.)  2) mandatory fully funded pillar (2006): covers old age benefits for those who started working for the first time after January 1 st 2003  3) voluntary fully funded pillar (2008): voluntary entrance of current contributors but also others (not covered by the first two pillars) Contribution rates: Total rate is 21.2% of gross salary for those contributing in the first pension pillar only. For those contributing in the first and second pillar, 13.78% of the 21.2% are contributed in the first and 7.42% in the second pillar. 5

EXCLUSION OF OLDER PEOPLE FROM THE PENSION SYSTEM 6 1) Older people continued to benefit only from the first pillar 2) Those who do not fulfill general criteria (64/62 years of age and 15 years of service): older women (especially women belonging to ethnic communities); redundant older workers. 3) Those in need of disability and survivors pensions as they are not provided in the second pillar. 4) Agricultural workers excluded from the 2 nd pillar

EXCLUSION OF OLDER PEOPLE FROM THE PENSION SYSTEM 7 5) Other vulnerable groups: - unemployed people, - those working only with short-term employment contract - those working on the grey market, including particularly the ethnic community groups (Roma, Albanians) - Those with underreported salaries which contributes towards payment of the pension contribution to the minimally calculated base (and not on the real paid salary). - Consequences: more than 70,000 (or 31.1%) people above the age of 65 are not covered with pension benefit in Macedonia

PENSION INCOME ADEQUACY 8 The average pension amounts per types of pensions in March 2010 were as follows:  mkd (186 euro) for the old age pensions  mkd (149 euro) for the disability pensions  mkd (133 euro) for the survivor’s pensions  mkd (66 euro) for the minimal agricultural pensions and  mkd (288 euro) for the military pensions The average pension is mkd (165 euro), while the average net salary is mkd (336 euro) and the average gross salary is mkd (495 euro) The average pension for the first three types (98%) is even lower mkd (156 euro) In 1992 average pension was 79% of the average salary, while in 2007 only 55,5% of the average salary

Pension system reforms in light of the OMC 9 Open Method of Coordination (OMC) :11 specific objectives grouped around the areas of adequacy, sustainability and modernization. The pension system reforms in Macedonia were generally driven by the objectives for its modernization and sustainability, rather than adequacy. The following challenges in the domain of pension adequacy remain:  ensuring that older people are not placed at risk of poverty and can enjoy a decent standard of living;  ensuring that older people share in the economic well-being of their country and can accordingly participate actively in public, social and cultural life; and  providing access to appropriate pension arrangements (public and private) which allow them to earn pension entitlements needed to maintain, to a reasonable degree, their living standard after retirement.

Social Assistance: Accessibility and Adequacy for the Non-pension Beneficiaries 10 Monetary, means-tested types of social assistance: 1) Social financial assistance (SFA): for a single household (one member) mkd - 35 euro 2 members - 48 euro 3 members – 61 euro 4 members – 71 euro 5 members – 87 euro In the first 3 years of receipt of the SFA benefit, the benefit is paid in the full amount, after the 3 rd year of receipt in only 50% of the amount. 2) Permanent financial assistance: mkd or 52 euro for one additional co-beneficiary who is not work able - 74 euro for two or more additional co-beneficiaries euro

Social Assistance: Accessibility and Adequacy for the Non-pension Beneficiaries 11 3) Personal care allowance: Determined in two amounts depending on the need for care: in amount of mkd (68 euro) for those in need of care to a larger extent and in amount of mkd (60 euro) for those in need of care to a lesser extent. 4) One-off financial assistance and assistance in kind: It is paid in amount from mkd – mkd (73 euro euro) depending on the severity of consequences incurred by the situation of social risk.

Social Assistance: Accessibility and Adequacy for the Non-pension Beneficiaries 12 In 2010 in Macedonia there were: beneficiaries of SFA, beneficiaries of permanent financial assistance and beneficiaries of the allowance for personal care Social assistance usage among the older population is low (1-3% of 65+) due to:  lack of information on existing rights and entitlements,  stigma,  complex administrative procedures  unsettled family relations (parents-children relations) No social pensions for those not in receipt of pensions or social assistance benefits! No legal possibilities for additional income by work after retirement!