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

2.3. Types of Pensions and Terms and Conditions of Their Assignment

The Law of the Republic of Moldova on State Social Insurance Pensions provides for the payment from social insurance funds of the following types of pension: the old-age pension, disability pension, and survivor’s pension.

2.3.1. Old-age Pensions

Attainment of the retirement age established by law, with a requisite insurance contributions record provided, is the main condition for assigning a full-amount old-age pension. Since 1999, after adoption of the 1998 Law on State Social Insurance Pensions, the retirement age has started to rise, both for men and women. Length of the requisite insurance contributions record has increased proportionately. If previously men had retired at 60 and women at 55 years old, then, after 1st January 1999, the retirement age started to rise by 6 months per year, and was scheduled to reach 65 years for men and 60 for women by 2008. But due to the adoption of Law No. 1485-XV, dated 22d November 2002, On Introduction of Changes to Article 41 of Law No. 156-XIV, dated 14th October 1998, On State Social Insurance Pensions, the retirement age was frozen at the 2002 level, i.e. at 62 years for men and 57 for women. Further increase of the retirement age was supposed to be postponed for the period of up to 5 years, i.e. till 2008. This suspension of the retirement age has led to an essential rise in numbers of newly assigned old-age pensions. According to data provided by the National Social Insurance Fund, in 2003 the figure was 2.5 times larger than in 2002. Experts of the Moldova’s Ministry of Labour and Social Protection assess the situation as negative. In their opinion, adverse demographic forecasts for the next few years cast doubt on the capability of the social insurance system to fund necessary payments, and thus threaten the stability and reliability of the whole system. Otherwise, there will be a disparity between relatively not numerous active workers many of whom work abroad often as illegal migrants, and a large number of pensioners which will be rising in the following years1. It is necessary to point out, that since 1999 (the starting-point of the reform) the National Social Insurance Fund’s data have been showing an annual shrinkage in the total number of pensioners, which became approximately 10% lower by 2004. During the same period the number of old-age pensioners declined by 13%.

Pension reform in Moldova projected that by 2008 the necessary length of a social insurance contributions record will grow up to 35 years, both for men and women. It is a rather essential rise, considering that the previous length of an insurance contributions record required for receiving an old-age pension was 25 years for men and 20 years for women. However the latest version of the Law on State Social Insurance Pensions has established the uniform necessary length of social insurance record equal to 30 years, both for men and women. At the same time this Law stipulates that an insured person, who, on attaining the retirement age, cannot re-confirm his or her complete required social insurance record while re-confirming the insurance record of at least 20-years’ length, has the right to a partial pension calculated in proportion to the length of his or her social insurance record. Hence a person may be soundly entitled to an old-age pension if he or she, having a 20-year long insurance record, attains the retirement age. It is also necessary to note that the law stipulates incentives for insured persons urging them to work until their insurance records would have the length of 35 or more years. In such a way, each additional year on the social insurance record, gained in excess of these 35 years, increases the assigned amount of a pension by 2% of the insured income, while during the time when the length of the social insurance record is within the range of 20 to 35 years this annual increment is just 1.2 %. There are also incentives in the Moldova’s pension laws to promote later retirement. In this case, the amount of a pension rises by 2 % of the insured income per each insurance year worked after attaining the statutory retirement age.

Length of an insurance record in the state social insurance system is calculated by way of summing up all insurance periods including periods when a person received temporary disability, maternity, and unemployment benefits, i.e. periods when insurance contributions for the beneficiaries were paid from specially appropriated funds.

Insurance record also includes non-insurance periods such as compulsory military service, child-rearing leave, as well as periods when a person was a member of a collective farm (kolkhoz) or creative union, minister or acolyte of religion, and periods when he or she cared for a disabled person having Disability Group I, disabled or handicapped child, elderly person aged 75+, when he or she was a full-time university student, or on military or equivalent service. But the procedure of funding for such periods is not yet legally settled. It is true even in respect of the inclusion in the insurance record of periods relating to caring for invalids and children, education and military service, which are directly defined by law as funded at the account of the national budget.

The pension reform has eliminated pensions for long service assigned to health and education workers since 1st January 1999. Such pensions assigned prior to the above date are to be paid at the account of the social insurance budget. Over the analysed period of 1999-2003 the total number of these pensioners decreased by 18 %, though their percentage in the total number of all pensioners is still stable and varies within the range of 0.7-0.8 %.

1. Annual Social Report, 2003, Ministry of Labour and Social Protection of the Republic of Moldova, p. 44.

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