Home
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

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

The outputs of the development of pension system of the Republic of Moldova are presented hereinafter.

1. The post-reform pension system of the Republic of Moldova was developing on the background of certain decrease of the total number of pensioners and quite considerable growth of newly granted pensions (especially in the recent years) that is related to the increase of the retirement age, as well as to the so called cohort effect, which is expressed in a strong influence of the changes in the number of certain sex/age cohorts, occurred in different years on the number of “new” pensioners.

2. The increase of the retirement age, envisaged by the pension reform, influenced the structure of pension beneficiaries. Therefore, if in the total number of pensioners, the old-age pensioners prevail; among newly granted pensions, the share of beneficiaries of disability pensions is considerable. After the freezing of the increase of the retirement age, the growth of the number of women-beneficiaries of disability pensions was ceased, while for men it was observed during the whole post-reform period.

3. Amongst privileged pensioners (men up to 62 and women up to 57) the number of women is almost twice higher than the number of men. These are mainly mothers who gave birth and brought up five and more children up to the age of eight. Their number is divided uniformly between agricultural and non-agricultural pensioners.

4. The number of old-age pensioners, retired before ‘90th of the last century (those who are at the age of 70 and over now) is characterized by the prevalence of agricultural pensioners. The number of those retired after 1990 year is characterized by a sharp decrease of the number of agricultural pensioners. The number of men was reduced by about a third, while of women – by a quarter.

5. In the recent six years the nominal size of the average pension in the Republic of Moldova grew up from 139.0 to 440.2 lei, i.e. by 3,2 times. All pension types increased by almost equal rates. Such synchronic growth of the sizes of various pension types is mainly related to their complex legislative regulation, stipulating, as a rule, simultaneous change of all types of granted pensions. This led to the maintenance of quite stable correlations between the sizes of different pensions during a long period of time.

6. Since 2003 the amount of newly granted pensions has become lower than the amount of the average pension. With time this difference shall increase. This situation could be explained by the fact that the size of newly granted pensions depends directly on the average monthly insured income, calculated based on non-indexed salary for the whole working activity that leads to the devaluation of the amount of wages for past periods.

7. The pension size depends on the years of its calculation. The pensions, granted before 1991 are characterized by a clear dependence: the earlier they are granted, the lower is their average size. After 1991 this tendency is broken. The average pension size by joint cohorts could vary considerably, while after 2003 the average size of newly granted pensions has started to decrease.

8. The average pension size in real values remains considerably behind from the subsistence allowance of the pensioner. However, there are positive tendencies in this relation. If in 2001 these values differed by 3 times, in 2005 this gap constituted only 1,7.

9. Since 2001 the correlation between the average pension and average wage has started to decrease. For the period from 2001 to 2003 the value of this indicator decreased from 25,6% to 23,8%. The increase of pensions, carried out in 2004, allowed to increase its size by more than 50% that leads to the growth of the replacement coefficient up to 29,4%. However, in 2005 the replacement coefficient went down again until 28,9% and in the first half of 2006 constituted 26,7%. The regular decrease of the replacement coefficient is related mainly to the fact that the wage in Moldova is increasing by higher rates than pensions, since according to the current legislation the pensions are indexed only by the average value between the average annual increase of the consumer cost index and annual growth of the wage in the country for the previous year. In this situation the chronic decrease of the replacement coefficient is inevitable. The situation is also worsening by lower sizes of newly granted pensions that is related to the specifics of used pension formulas.

10. The analysis of pension system of the Republic of Moldova allowed to determine the main tendencies of its development and identify the most vulnerable points. The current pension system can propose to its participants after being retired a quite modest level of insurance. Under all existing conditions of pension system operation, the replacement coefficient shall decrease further up to 2040 year and then it shall stabilize at the level of 11-12%. The differentiation between the average size of calculated wage and average size of calculated pension shall grow up considerably. So if in 2005 their size differed by 3,2 times, at the end of the forecast period this difference shall constitute 8,5. At the same time the pension system shall be characterized by proficit in the main part of the forecast period.

11. In order to avoid a sharp reduction of the average pension size in the transition to their calculation using only the new pension formula, it is necessary to develop a mechanism for indexation of the average monthly insured income. This should be a well-thought mechanism, since the excessive indexation could lead to the deregulation of the pension system.

12. The change of the retirement age has a tonic influence on the pension system on the whole. The increase of the retirement age leads to the growth of the number of employed and decrease of the number of pensioners resulting in the reduction of the pension burden coefficient and increase of the possible replacement coefficient. The forecast calculations showed that if increase the retirement age for men and women up to 65 years, the pension burden coefficient shall decrease by 1,3 times, allowing to increase the possible replacement coefficient by 30% by the end of the forecast period. Besides any increase of the retirement age has serious consequences at the beginning of the increase.

13. Different sizes of insurance contributions, established by the legislation of the Republic of Moldova, for various categories of payers lead to serious redistributive processes inside the pension system and result in inconsistency between the amount of pension contributions and the amount of pension payments, received by certain categories of pensioners. In case of detaching the payers of insurance contributions for hired non-agricultural workers in a separate pension system (they pay the highest insurance contributions), the replacement coefficient of the beneficiaries of non-agricultural pensions shall increase twice.

14. A certain result from the point of view of the replacement coefficient increase could be reached by establishing one tariff (maximal at present) of insurance contributions for all categories of payers. This shall allow increasing the replacement coefficient by 17-20%.

15. The greater result could be reached by establishing one tariff of social insurance contributions combined with the increase of the retirement age, established by the law, for men and women up to 65 years. This shall allow increasing the replacement coefficient by a quarter at the beginning of the forecast period and by a half at the end of the forecast period.

16. The postponed retirement contributes also to the increase of the replacement coefficient. Each postponed year allows increasing the pension by 8-10%. The more considerable result could be reached by recalculating the pensions of working pensioners according to the amount of contributions paid by them. This increases twice the individual replacement coefficient of the working pensioner/man up to the age of 70 and the annual pension growth could constitute 11-13%. At the same time in case of retirement at the pension age, established by the law (under all other equal conditions), the replacement coefficient of the man-pensioner up to the age of 70 is even decreasing a little from 20,2% at the age of 62 to 18,7% at the age of 70 and the annual pension growth constitutes not more than 3%.


Назад К оглавлению Вперед

© Independent Actuarial Information-Analitical Center
Office 342, Building 3a, 1 Khoroshiovsky Proezd, Moscow, 125284 Russia
Tel./fax: (7-495)255-63-08, e-mail: Chief@actuaries.ru