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

2.2. Insurance Contributions and the Tax Base

It is necessary to point out that Moldova has a rather complicated system of insurance contributions. First, insurance rates are differentiated by payer’s categories, viz. employers, employees, and self-employed persons, the latter include lawyers, notaries, persons working on independent contracts, etc. In the employers’ category those paying contributions for hired agricultural workers are marked out. Their rate is somewhat lower, e.g. in 2004 it was 17.6 % as compared with 24 % for other employers paying contributions for hired workers in other economic sectors.

Second, tax base values used for fixing amounts of insurance contribution payments vary seriously with the payer’s category. In this way, the “total fund of insured persons’ monthly earnings” makes up the base for calculating the amount of monthly insurance contributions1. Employees themselves pay insurance contributions based on the amount of their individual monthly earnings including extra- and additional pays either in cash or in kind. However the amount of these individual earnings now has a ceiling of a 3-fold average monthly wage throughout the national economy. It is necessary to point out that reforming of the Moldova’s pension system implies to gradually shift the burden of paying insurance contributions from employers to employees. It is supposed that “the amount of the employers’ contribution will be annually decreasing by 1 % while that of the individual contribution rising by 1 %”2.

Whereas everything is clear as regards to payments of employers and employees, the case with payments of other payer’s categories is much more complicated. First of all it involves persons engaged in agriculture. Land owners which individually cultivate their plots of land, as well as person which are lessees or lessors of land, are liable to pay insurance contributions proportionate to the acreage of their land and its site quality. In 2004 this rate was 1.7 Lei per 1 ballpoint-hectare3. At the same time individual land tenants, except those paying contributions calculated in conformity with another-type contribution plan, pay insurance contributions as fixed payments. The case becomes even more complicated with the fact that many land owners, having their land plots leased out and working for hire in other agricultural companies or at private persons, continue to pay contributions as land owners (i.e. calculated on the base of their ballpoint-hectares) rather than as paid workers, for this scheme is more profitable for the employer. Besides agricultural land tenants of, persons working on contract abroad or having independently concluded insurance contracts, also make fixed contributions to the pension system. For a number of self-employed persons, viz. lawyers, notaries, and sole proprietors, the amount of earned income serves as a base for calculating insurance contributions. Owners of entrepreneurship licences are levied on the base of these licence prices.

Such a complex system of insurance contributions brings about a number of troubles. First of all it involves the agricultural sector. A lower rate of insurance contributions established for employees engaged in agriculture, as well as an intricate system of contributions applied to owners of agricultural land, coupled with low collectability of these contributions, all these factors lead to a very serious re-allocation of pension funds in favour of the pensioners from former agricultural workers. According to data from the Moldova’s Ministry of Labour and Social Protection, in 2003 agricultural workers paid to the social insurance budget 7.9 % of its total receipts while in return they received pensions and compensations amounted to 45% of the total receipts4.

Considering that such juncture of things cannot last forever, the social insurance policy suggests that all the variety of Moldova’s social insurance contribution plans should be reduced to two plans, viz. the general rate applied to the wages and other remunerations fund (earned income fund), or fixed rate applied in the remainder cases.

1.              Law of the Republic of Moldova on State Social Insurance System, No. 489-XIV, dated 8th July 1999, Art. 22, para 1.

2.              Annual Social Report of the Ministry of Labour and Social Protection, 2003, p. 56.

3.              Translator’s note: ballpoint-hectare – a unit for measuring site quality of land, equivalent to a 1 hectare parcel of land with a site quality of 1 ballpoint.

4. Annual Social Report of the Ministry of Labour and Social Protection, 2003, p. 49.

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