SURVEY RESULTS Leendert van Driel, World Bank Tirana, October 8, 2015
Agenda 1. Introduction 2. Current situation private pensions 3. Information about participating companies 4. Provision of private pension plans 5. Information on trust in financial institutions 6. Conclusions and recommendations Survey results 2
Introduction (1) In June 2015 AFSA, in cooperation with the Albanian Statistics Institute, undertook a survey to study the level of employer and employee knowledge and attitude with regard to private pensions Results of the survey are meant to give input for developing a coverage expansion strategy for private pensions in Albania Coverage expansion is a fundamental element for the long-term financial sustainability of the private pensions sector Survey focused on companies employing at least 20 staff. State capital funded companies were excluded from the survey. 2,074 companies participated in the survey, which employ 174,903 employees or 16.8 % of the total employed workforce in Albania. Based on the size of the survey the results of the survey can be considered representative for the situation in Albania Survey results 3
Introduction (2) The questions in the survey were grouped into four sections: 1. Questions on general company information including whether these companies provide pension plans for their employees 2. Questions to gather information from the companies that do not provide pension plans for their employees 3. Questions to gather information from the companies that do provide pension plans for their employees 4. Questions to gather some additional information from the participating companies Survey results 4
Current situation (1) Private pensions are provided by 3 Pension Management Companies: Raiffeisen, Sicred, Sigal. Their market shares are : Members Net assets 26% Raiffeisen Raiffeisen 37% 50% Sicred Sicred 51% Sigal Sigal 23% 13% For coverage the most relevant is members market share . Survey results 5
Current situation (2) Analysis of the data about coverage in Albania leads to the following conclusions: • Number of people in Albania with voluntary pensions is very small: at the end of 2013 the number of members with PMC’s is 3,1% of the total number of employees working in non-agricultural companies in Albania • Growth of the number of members is small considering the size of the market • Sigal is the largest PMC with approximately 50% of the market • Raiffeisen has shown very small growth during 2014 Survey results 6
Information about participating companies (1) Only 22 (or 1.06 %) of the companies participating in the survey provide pension plans to their employees. The 2,074 companies participating in the survey have been categorized according to the following criteria: • Number of employees • Economic activity • Ownership • Year of establishment • Geographical location Survey results 7
Information about participating companies (2) % distribution of number of companies in each segment 6% >250 staff 50‐249 staff 38% 56% <50 staff Survey results 8
Information about participating companies (3) Percentage of companies ranked according to year of establishment Survey results 9
Information about participating companies (4) Percentage of participating companies in a geographical location More than half of the surveyed companies are located in Tirana region Survey results 10
Information about participating companies (5) Survey found that there is a relevant lack of knowledge and awareness about the Albanian pension system and about voluntary and occupational pensions both from employers and employees Knowledge category Index value Employer knowledge of Albanian pension system 1.64 Employee knowledge of Albanian pension system 0.91 Employer knowledge of voluntary and occupational pensions 1.60 Employee knowledge of voluntary and occupational pensions 0.91 The table ranks the results in a knowledge index, with 0 corresponding to “ No knowledge ” and 4 corresponding to “ Very good knowledge ”. Result shows that level of knowledge for both groups is below average level of 2, but is higher among employers than employees. Survey results 11
Information about participating companies (6) Supply of pension plans in Albania is limited. Only 14,1 % of surveyed companies have been contacted by a PMC. Other 85,9 % were never contacted. Overview of PMC’s that contacted companies about pensions: - 45,1% of contacted companies had been contacted by Sigal - 39,9 % of contacted companies had been contacted by SiCRED - 15 % of contacted companies had been contacted by Raiffeisen Survey results 12
Provision of pension plans (1) The majority (98.9%) of the surveyed companies do not provide private pension plans. From this group only 14% have considered developing a professional pension plan. These are concentrated in “Financial and insurance services”, “Health and social work activities” and “Agriculture, forestry, fisheries” sectors. The main reasons for not introducing private pension plans are given in the table below: Description % of total 46 Lack of fiscal facilitations 43 Priority given to other benefits for employees 36 Development of pension plan is considered very costly by employer Another important factor for not introducing private pension plans was the lack of trust in the financial system and the PMC’s. Survey results 13
Provision of pension plans (2) Survey shows that employees have shown little interest in pension schemes. According to companies the most efficient methods to raise interest of employees in pensions are: • better information in written form • presentations how pension schemes work • explaining the benefits of pension schemes to employees • awareness raising on the insufficiency of the state scheme • improving the trust in PMC’s and the financial system in general This shows the need for the development of marketing and awareness campaigns and pro-activity on the part of PMC’s . Survey results 14
Provision of pension plans (3) Only 22 of the surveyed companies provide pension plans. They employ 2.303 persons or 1,3% of the total staff of the surveyed companies. The group of companies providing pension plans is concentrated in 2 economic activity areas, namely the administrative and support services field and the financial and insurance services field. These companies are concentrated in the Tirana region and are considered large, because they employ between 50 and 249 staff. Of the 22 surveyed companies that provide pension plans only 8 companies provide these plans to their entire staff. In all cases the pension contributions are on a 1 to 1 ratio between employee and employer. In 20 cases the employee can choose to contribute a higher amount than agreed without additional contribution from the employer. Survey results 15
Information on trust in financial institutions Trust in the financial sector plays an important role in the expansion and sustainability of the sector. Financial relations are relations of trust and without this element financial markets cannot develop, including the private pensions market. 100% 21 26 32 80% 34 5 6 9 60% 8 7 14 20 13 17 40% 28 29 31 28 20% 21 16 14 14 0% 5 1 1 AMF Raiffeisen Sigal Sicred Highly trusted Trusted Average trust Little trust Very little trust No info Trust in the institutions specified in the table above has been assessed below the average level. On a 5-point scale the index value would vary between 1,86 to 2,25. Survey results 16
Conclusions and recommendations Based on the results of the survey the following conclusions can be drawn: • the level of knowledge on private pensions, both by employers and employees, is very limited • trust in the financial system is weak • business climate and cost factors are important elements in limiting the demand for private pensions products • fiscal factors, especially up until 2014, have impeded the pensions market development • the supply of private pensions has been very limited until now Survey results 17
Conclusions and recommendations The aging dynamic will continue in Albania which brings about risks to the pension system sustainability. The main macro factors to have caused the limited development of the pensions market seem to remain unchanged for the mid term period. This leads to the following recommendations: • On the supply side there is a need for more aggressive marketing campaigns and increased contacts with companies • On the demand side the improvement of fiscal treatment of pension products will stimulate demand • Steps need to be taken to raise public awareness of the security and benefits to individual employees of pension saving • For the longer term, increased consideration needs to be given to steps to encourage greater participation as part of the developing coverage expansion strategy • Ideas set out in the report from the Financial Sector Assessment Report which looks at international best practice on expanding private pensions. Survey results 18
T hank you for your attention World Bank Group Tirana Albania
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