Pension System Reforms in the Republic of Macedonia: Expected Benefits and Challenges

Suzana Bornarova; Natasha Bogoevska; Svetlana Trbojevik

Authors

Suzana Bornarova Associate Professor, University of Ss Cyril and Methodious, Faculty of Philosophy, Institute of Social Work and Social Policy
Natasha Bogoevska Assistant Professor, University of Ss Cyril and Methodious, Faculty of Philosophy, Institute of Social Work and Social Policy
Svetlana Trbojevik Assistant Professor, University of Ss Cyril and Methodious, Faculty of Philosophy, Institute of Social Work and Social Policy

Abstract

The process of pension system reforms in the Republic of Macedonia has been initiated in 1993 due to deficits of the Pension and Disability Insurance Fund (PDIF), low fertility rates, demographic aging and high unemployment rates in the country. With the enactment of the new Law on Pension and Disability Insurance and series of its subsequent changes and amendments, in the period until 2000 a policy of growing restrictions in the management of the state pension system was in place.Pension and disability insurance in the Republic of Macedonia until 2006 used to belong to the Pay As You Go System (PAYG), based on inter-generational solidarity and financed through workers salary contributions. The key reform was the transformation of this PAYG system which entailed a line of challenges related to its solvency. The new system kept the PAYG go principle only in the first pillar, while the other two newly introduced pension pillars are financed through individual savings accounts.This paper is going to address the above pension system changes, focusing on both paradigmatic and parametric reforms. In addition, it attempts to present the subsequent challenges and expected benefits of these processes.

DOI: 10.5901/ajis.2013.v2n9p393