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

1. Introduction

2. Fundamentals of Moldova’s Pension Legislation
2.1. General Principles
2.2. Insurance Contributions and the Tax Base
2.3. Types of Pensions and Terms and Conditions of Their Assignment
2.3.1. Old-age Pensions
2.3.2. Invalidity Pensions
2.3.3. Survivor’s Pensions
2.3.4. Pensions to Specific Categories of Population
2.3.5. Social Pensions/Benefits
2.3.6. Pensions Paid at the Account of the State Budget
2.4. The Minimal Pension and Guaranteed Minimum
2.5. Pension Indexing

3. The Present-Day Demographic Setting
3.1. General Population Changes
3.2. Fertility
3.3. Mortality and Life Expectancy
3.4. Population Growth and Migration
3.5. The Base Demographic Forecast

4. Demographic Trends in the Economic Activity of the Population
4.1. Demographic Factors Affecting the Number of Population at the Economically Active Age
4.2. The Profiles and Dynamics of the Economic Activity of the Population
4.3. Projection Scenarios for the Economic Activity of the Population

5. General Employment Issues

6. Payers of Pension Contributions
6.1. The Profile and Number of Pension Contribution Payers
6.2. Projection Scenarios for Insurance Contribution Payers

7. Recipients of Pensions/Benefits
7.1. Profile of Pension Recipients
7.2. Old-Age Pensioners
7.3. Invalidity Pensioners
7.4. Recipients of Pensions for Survivors
7.5. Recipients of Social Pensions/Benefits
7.6. Forecast of Pensioner Numbers

8. Present-Day Macroeconomic Environment
8.1. Historical Background
8.2. Base Macroeconomic Forecast

9. Software Complex
9.1. Mission and Structure of the Software
9.2. Computation Scenario Block
9.3. Demography Block
9.4. Macroeconomics Block
9.5. Receipts Block (Calculation of Contributions)
9.6. Expenditure Block
9.7. Output and Reports

10. Approbation of the Model
10.1. Modelling Scenarios
10.2. Simulation Output
10.3. Computations on the Pension Calculator

Annex 1. Base scenario




Development of the Analytical Model of the Republic of Moldova’s Pension System

10.2. Simulation Output

Calculations made with the use of basic scenario parameters with pension indexing factors equal to 50 % of wage growth rates and indexing of the average monthly insured income excluded, tell that the Moldova’s pension system will be able to have a deficit-free budget by 2005 and maintain these conditions till the end of the forecasting period. Net surplus of the system will rise as high as 1.5 % of GDP (Fig. 10.1).

Fig. 10.1: Balance of the Moldova’s pension system, transfers from the state budget excluded (Base Scenario)

However if the pension system is functioning under such conditions, there may occur a sharp fall of the real replacement rate (coefficient of replacement) and affordable replacement rate which are principal criteria of the level of pension provision. For instance the real replacement rate decreases from 23.9 % in 2005 to 9.68 % in 2050, while the affordable replacement rate – from 21.55 to 11.62 % (Fig. 10.2). A relatively smaller fall of the affordable replacement rate is most likely due to under-indexation of pensions as compared with the level provided for by law.

Fig. 10.2: Replacement rate (Base Scenario)

In case of raising the statutory age of retirement up to 65 years for men and women alike, the number of pension contributions payers will be exceeding that of pension recipients till the end of the forecasting period, while if the statutory age of retirement is unchanged, the two numbers will get equal in 2044, as Figs. 10.3 and 10.4 show. These results are well in line with the intuitive idea of how variations of the statutory age of retirement affect performance of the pension system. A rise of the statutory age of retirement is increasing the number of employed persons and therefore the number of insurance contributions payers while decreasing the number of pensioners and pension load coefficient. This road is finally leading to the growth of the affordable replacement rate.


Fig. 10.3: Age of retirement at 62/57

Fig. 10.4: Age of retirement at 65/65

In the base scenario (without indexing of the average monthly insured income) the pension system will be having a net surplus since 2005 and up to the end of the forecasting period. However if the average monthly insured income is being indexed in accordance with inflation rates, such a net surplus will be kept no longer than till 2040, and, further, if this indexing is being performed with adjustment for wage growth rates, the pension system will get a deficit budget as early as in 2018 (see Fig. 10.5). In the first case the deficit of the pension system will be 0.76 % of GDP by 2050, in the second case – 6 %.

Fig. 10.5: Balance of the pension system under different terms of indexing of the average monthly insured income

At the same time if the average monthly insured income is indexed it will have a positive impact on variations of the real replacement rate (coefficient of replacement). In the base scenario the real replacement rate declines over the forecasting period from 23.87 to 9.68 %, while if indexing is performed with adjustment for inflation and for wage growth rates the indicator analysed will come down (see Fig. 10.6) only to 12.53 % and 19.85 % respectively.

Fig. 10.6: Real replacement rate under different scenarios of indexing the average monthly insured income

Performance of the pension system in many respects depends on term of pension indexing. In the base scenario pensions were indexed by factors equal to 50 % of wage growth rates. In this case the pension system will have a net surplus during the entire forecasting period (see Fig. 10.7).

Indexing of pensions with adjustment for inflation would be most favourable for the pension system development. In this case this system will also have a net surplus, but by 2050 its size will be almost doubled and reach 2.89 % of GDP. If pensions are indexed in accordance with wage growth rates, the pension system will be having a deficit since 2005. Then this deficit will grow up to 3.58 % of GDP in 2025 and come down to 1.28 % of GDP by the end of the forecasting period.

Real replacement rate behaves differently under different terms of pension indexing (see Fig. 10.8). If pensions are adjusted for inflation the real replacement rate will sink down to 7.65 % while adjustment for wage growth rates will allow to get the real replacement rate equal to 13.38 % at the end of the forecasting period (let us remember that this indicator amounts to 9.68 % in the base scenario).

Fig. 10.7: Balance of the pension system under different variants of pension indexing.

Fig. 10.8: Real replacement rate under different scenarios of pension indexing


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