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Supervision and Coverage of Pension Funds in Albania

Project Development Objective (PDO)

This technical assistance aims to (a) enhance the regulation and supervision of private pensions in Albania and (b) expand pension coverage in a more secure, sustainable, and efficient system.

Background

The government of Albania only recently (in 2009) passed legislation to establish private pensions. Currently, the Albanian government is implementing wide-ranging reforms in the public sector pension system. Government authorities have committed to drafting new legislation to address issues that are critical to the sustainability of public sector pensions. At present, neither the number of contributors nor the amount of contributions is sufficient to sustain the level of benefits that pensions promise their participants.  

Specifically, the Albanian Financial Supervisory Authority (AFSA) is seeking to (a) address the absence of an appropriate (RBS) framework for pensions and (b) improve collection of employment data to enable expansion of coverage. The agency wants to promote efficient, secure, and sustainable pensions that provide adequate retirement income for a growing share of the Albanian population. 

Activities

The main outputs of the project are as follows:
 
Component 1: Regulation and supervision
The project team is (a) preparing an outcomes-based diagnostic report and roadmap; (b) developing an RBS framework for private pensions; (c) drafting amendments to regulations, guidance, and legislation; and (d) providing training, capacity building, and consultations. 

Component 2: Coverage expansion
The project team is providing an analysis of employment data, which will support expansion of pension coverage. The team is also working to expand outreach efforts specifically related to expansion of pension coverage. 

Expected Outcomes

The main expected outcomes of the project are as follows:

Impact at the enabling environment level
     1.  Developing an RBS framework that is both better informed and evidence based, as well as new
          RBS regulations and guidance

     2.  Developing an effective AFSA by providing the agency with the staff, systems, processes,
          procedures, manuals, and powers necessary to efficiently implement RBS of private pension
          plans

     3.  Establishing an informed plan for coverage expansion with a targeted group of employers
 
Impact at the financial system level
     1.  Creating a private pension industry with more security, better governance, better
          performance, and reduced risk

     2.  Improving investment allocation of pension funds to maximize the long-term trade-off of risk
          and return

Impact at the beneficiary level (pensioners)
     1.  Enhancing security of the private pension system through improved risk management

     2.  Enhancing coverage of private pensions as more employers offer plans to their employees

     3.  Enhancing efficiency of private pension plans by reducing costs, specifically through (a) use of
          more efficient channels for employees to join plans and (b) improved economies of scale as
          the pension industry continues to grow

     4.  Increasing returns on investment, especially if asset allocations are less conservative

     5.  Improving evidence-based policy and implementation