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Legislation Publications Pension models About project Statistics
Legislation Publications Pension models About project Statistics

1. Introduction

2. Actuary expertise
2.1. Contents of the actuary expertise
2.2. Actuary control cycle
2.3. Actuary expertise tools

3. Basics of the pension legislation of the Republic of Moldova
3.1. General principles
3.2. Social insurance contributions and taxable basis
3.3. Pension types and conditions of their assignment
3.3.1. Old age pensions
3.3.2. Disability pensions
3.3.3. Survivors pensions
3.3.4. Pensions to some categories of citizens
3.3.5. Social pensions/benefits
3.3.6. Pensions paid from the state budget
3.4. Minimal pension and guaranteed minimum
3.5. Pension formulas
3.6. Pension indexation

4. Demographic situation in the Republic of Moldova
4.1. Dynamics of population number and sex/age structure
4.2. Birth rate
4.3. Mortality and life expectancy
4.4. Marriage and divorce rates
4.5. Population natality and reproduction
4.6. Demographic forecast

5. Current macroeconomic situation
5.1. Tendencies of population economic activity
5.2. Development of basic forecast

6. Background information on pension insurance
6.1. Number of pensioners
6.1.1. Analysis of the number of pensioners
6.1.2. Distribution of the number of pensioners by pension types
6.1.3. Sex/age number of pensioners
6.2. Pensioner’ standard of living
6.2.1. Average size of pensions
6.2.2. Compensation of lost wage
6.2.3. Gender differences in pension sizes

7. Modeling outputs

8. Outputs and perspectives of the development of pension system of the Republic of Moldova

9. Annex: Analysis of the risks of the Non-Financial Defined Contribution (NDC) and Financial Defined Contribution (FDC) pension systems
9.1. Principles of the design of NDC pension system
9.2. Principles of the design of FDC pension system
9.3. Experience of applying FDC schemes
9.4. Comparison of NDC and Funded schemes




Pension system of the Republic of Moldova: actuary expertise

6.2. Pensioner’ standard of living

6.2.1. Average size of pensions

The main index, characterizing the pensioners’ standard of living is the size of pensions, insured by the pension system. The dynamics of the average size of the nominal pension is presented in the Table 6.2.

In the period from 2001 to 2006 the nominal size of the average pension in the Republic of Moldova grew up from 139.0 lei to 440.2 lei, i.e. by 3,2 times.

In the reported period almost all pension types increased by equal rates. So the old age pensions and social benefits grew up by 3,3 times, disability pensions – by 2,7 times and survivor pensions – by 3 times. Such synchronic increase of the sizes of various pension types is related to their complex legislative regulation, stipulating, as a rule, their simultaneous change. This led to the maintenance of quite stable correlations in the sizes of various pensions for a long period of time.

Table 6.2
Average monthly pension size, lei

Year

Old age pensioners

Disability

Survivor

All pensioners

Social pensioners**

 

non-agr.

agr.

total

2001

157.7

126.3

139.6

149.6

91.7

139.0

55.4

2002

184.2

150.6

165.1

170.1

106.1

163.0

68.6

2003

236.4

203.5

218.1

203.7

139.1

211.6

102.7

2004

366.5

311.4

336.3

304.5

210.2

324.4

125.3

2005

430.9

367.1

397.0

350.0

240.5

380.9

137.9

2006*

497.8

422.6

458.5

406.4

276.7

440.2

184.2

* Here and further on the data is presented for the first six months of 2006
** Here and further on for social pensioners is presented the average size of benefits

The comparison of the amounts of average monthly pensions, presented in the Table 6.2 with the amounts of newly assigned pensions, presented in the Table 6.3 shows that since 2003 the amount of newly assigned pensions becomes lower than the amount of the average pension. This affects almost all pension types.

With time this difference is increasing. So if in 2004 the newly assigned old age pensions were only by 0,7% lower than the average pensions, in the first half of 2006 this difference constituted 10,6%, while for the disability and survivor pensions this difference constituted 35,0% and, correspondingly, 20,0%.

Table 6.3
Average monthly newly assigned pensions, lei

Year

Old age pensioners

Disability

Survivor

All pensioners

Social pensioners

 

Non-agricultural

Agricultural

Total

2001

173.68

126.51

150.8

148.0

103.1

150.6

58.0

2002

217.0

155.3

193.1

161.0

119.5

166.2

69.8

2003

250.4

187.7

225.6

183.7

147.2

204.9

102.1

2004

375.3

265.7

333.9

269.9

207.2

304.4

118.7

2005

413.7

271.5

362.8

262.2

203.0

320.7

128.8

2006

469.5

313.0

414.5

301.8

231.4

371.7

164.8

This situation could be explained by the fact that the size of newly assigned pensions depends directly on the average monthly insured income, which is calculated from non-indexed wage for the whole working activity, leading to the devaluation of the wage amount for previous periods.

The Picture 6.11 presents the data on average size of old age pensions depending on the year of their assignment. It could be clear seen that for the pensioners, retired before 1991 it is true the statement that the longer the pensioner is on pension, the lower is the pension size. This situation is rather logic, since as result of inflation processes (regardless indexations) the pension in the next year should be a little higher than in the previous year. Although since 1991 the existing tendencies begin to be broken. The size of newly assigned pensions begins to fluctuate. This is related first of all to the unstable economic situation, specific for almost all countries from the post-soviet environment, including the Republic of Moldova. Besides the pension reform implemented in the country led to modification of the conditions of pension assignment that contributed to the change of newly assigned pensions. On the Picture 6.11 it could be clear seen that after 1991 the dynamics of the average size of pensions, assigned in any year, loses its stability, leading to the fact that the average pension size by joint cohorts could differ quite significantly. Particularly, it is to be mentioned the decrease since 2003 of the average sizes of newly assigned pensions.

Picture 6.11. Average size of old-age pension depending on the year of pension assignment, 2005.

However, the living standard, insured by the pension system to its participants, is characterized by the actual pension size, not by the nominal. The Picture 6.12 presents the data on the dynamics of the nominal and actual size of the average pension and budget of the subsistence allowance, which points out to the falling of the rates of average real pension growth from its nominal value. At the same time there are to be mentioned some positive tendencies.  So if in 2001 the average pension size remained behind from the pensioner’ subsistence allowance by three times, in 2005 it constituted only 1,7 times.

Picture 6.12. Dynamics of the nominal and real size of average pension and budget of the subsistence allowance.

For the evaluation of the pensioner living standard it is not sufficient to take into account only the average size of paid pensions. Certainly, an interesting fact is the distribution of pensioners by the level of their pensions. The Picture 6.13 presents this information, including the distribution of the average size of old age pension, as well as the average size of newly assigned pensions.

The data characterizing the distribution of the average size of old age pension by number of beneficiaries allows to say that in 2005 the average pension size of only 3,5% of pensioners reached the size of the subsistence allowance. More than 80% of pensioners benefit by pensions in amount from 300 to 450 lei that constitutes 46,2% and 69,3% out of the subsistence allowance. Thus it could be stated that the main part of pensioners live below the poverty line (or close to it). If examine the correlation between the maximal and minimal size of pensions, i.e. size of pensions received in the highest and lowest income groups, it shall be more than 7 times. However, if take into account that the main part of pensioners, over 90%, benefit by pensions in the amount from 250 to 650 lei, this correlation shall reduce to 2,6 times. It is to be mentioned that more than 80% of pensioners benefiting by pensions in the amount from 300 to 450 lei points to its insufficient differentiation, leading to the equalization of pension insurance.

Picture 6.13. Bar chart of the distribution of old-age pension size in 2005.

The newly assigned pensions are characterized by a great dispersion. As negative it is to be mentioned the higher share of pensioners with a pension in amount of 300 lei and less. They constituted in 2005 – about 63,8%, while in the total number of pensioners they constitute only 20,2%


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