World Bank experts propose to increase retirement age in Moldova

Chisinau, 9 December /MOLDPRES/-Experts of the World Bank propose to revise the pension calculation formula, to increase retirement age and set the same retirement age for women and men. The pension system reform, initiated in 1998, was planning a gradual raise of the retirement age up to 65 years both for men and women, WB experts Yuliya Smolyar and Victor Neagu said in an analysis.

The pension system reform, started 17 years ago, is largely the history of a “unfinished reform”, the analysis’ authors said. After several years of implementation, “the gradual increase in the retirement age was suspended. And given that the retirement age failed to rise, the planned growth of pensions was also suspended”.

The population aging, massive emigration, sharp drop in insured people dictate urgent actions aimed at improving the current public pension system, the bank’s specialists said.

Forecast growth in life expectancy, along with the low fertility rates, will increase the share of people aged over 64 years from 11.3 per cent in 2012 to 23.5 per cent by 2050. The situation is exacerbated by a massive emigration. According to estimations, about 25 per cent of Moldovans able to work are abroad, the analysis reads.

Demographic trends are continuously deteriorating, emigration, low participation of workforce, as well as a high level of informal employment in economy led to a sharp drop in the number of insured people and taxpayers. In one decade alone (2002-2012), the number of insured people decreased by 40 per cent in Moldova, whereas the covering of contributions significantly fell, standing at 0.76 retired people per one taxpayer at present. Till 2020, due to ageing and demographic trends, the ratio is scheduled to rise to 1 retired person per 1 taxpayer.

“Revenues of all people are dropping when they retire, and the decrease in incomes for Moldovans is one of the biggest in Europe. In 2013, the average age limit pension was equivalent to about 28 per cent of gross wage”, the experts noted. They also said that, if the system was not reformed, the gap between people’s incomes and their pension would be rising in the long run, that will make the system unviable from the social and political viewpoints.

Upon a request by the Moldovan government, the World Bank completed a comprehensive analysis of the pension sector, Under the analysis, a number of reform options have been formulated. The analysis shows that, if the current system is not amended, people will get less and less for their contributions, and thus they will be less motivated to contribute.

(Reporter V. Bercu, editor L. Alcaza)