27% of the population of retirement age is being pushed inevitably towards the extreme poverty line, remaining outside the benefits of economic growth. The latest official data show that the average payment of the generation that retired in 2025 was 16 thousand lek, with an annual decrease of 3%, while 55% of all pensioners in the country are treated with partial pensions, the value of which does not exceed an average of 13,500 lek per month. This situation contradicts Albania's status as an upper middle-income country, where the poverty line according to the World Bank requires a minimum of $ 249 per month. The public pension scheme is deteriorating due to the breakdown of the dependency ratio between those who pay and those who benefit, while the burden of survival of pensioners is being transferred to their children and families, creating a chain effect. Surveys show that over 87% of the elderly cannot cover their needs with their pension.

The greatest paradox of Albania's economic recovery after the pandemic lies in the large gap created between economic growth and the impoverishment of the elderly.

Despite the fact that between 2021 and 2025, the country's economy experienced an expansion of over 24%, this growth never translated into benefits for pensioners and people under social protection.

On the contrary, their real incomes have declined. The drastic increase in living costs and high inflation have completely eroded their purchasing power, pushing 27% of the retirement-age population inevitably towards the edge of extreme poverty.

The latest official data shows the scale of this social crisis. The average pension of the new generation of retirees last year fell to just 16 thousand lekë, or 3% less compared to those who retired in 2024.

The incomes of this stratum have not only lost the battle with market prices, but are also experiencing a net decline in net worth. Last year, about 55% of the country's 641,085 pensioners were treated with a partial pension, at a time when the average value of this payment was only 13,500 lek.

This situation contradicts the country's international status. Albania, already classified as an upper-middle-income country, has a poverty line defined by the World Bank of USD 8.3 per capita daily expenditure, which means that the calculated subsistence minimum for the country must be at least USD 249 per month.

The origins of this crisis date back to 2014, when the last pension reform was undertaken. Through criteria for years of service, the reform made the standards for receiving a full payment unattainable, and to this day, the government is delaying in correcting these errors.

Frequent and continuous changes in the organization of ministries neglected a new reform that had been launched specifically for pensions, while the army of this layer is growing at a frightening pace.

Last year alone, 30 new pensioners entered the social security scheme, a figure almost twice as high as the average of the last decade.

This influx has brought the number of old-age pensioners to over 641 thousand, which constitutes 27% of the country's entire population. But, while the success of a government is measured precisely by the prosperity it is able to create for the weakest sections of society, the opposite is happening in Albania, as year after year, new old-age pensions are decreasing.

Albanian pensioners were not only excluded from the benefits of economic growth, but on the contrary, they are paying the bill and the higher costs that came as a result of the increase in wages and other incomes that the rest of society benefited from, legally or illegally.

 The number of pensioners is growing faster than that of contributors

The Albanian pension system is facing a stronger increase in the number of beneficiaries from the pension scheme than contributors. The latest data shows a break with the historical trend.

The number of old-age pensioners has increased significantly, reaching 641,085 beneficiaries in 2025, compared to around 557 thousand in 2021.

Over the last five years, over 84,000 pensioners have been added to the system, while last year alone, the number of people who retired reached 33,518, almost double compared to the previous year.

Expansion would not be problematic if the public scheme registered a proportional increase in the number of contributors. The Albanian scheme operates on the traditional model of intergenerational solidarity, where direct contributions from the current workforce finance third-generation pensions in real time.

This model guarantees financial sustainability only if the dependency ratio between those who pay and those who benefit remains favorable, but this very ratio is experiencing negative slippage year after year. While pensioners in the scheme increased by 84 thousand from 2021 to 2025, contributors increased by 80 thousand.

In fact, in 2025, the ratio worsened further as the number of pensioners entering the scheme was 23% greater than that of new contributors. These developments, more than informality in the labor market, are due to demographic developments where the progressive aging of the population is being drastically accelerated by the migratory hemorrhage of young people.

After the 2021-2025 pandemic, over 166.4 thousand Albanians emigrated more than returned, INSTAT reported, most of whom are young. This productive layer that leaves the country pours its contributions into the German, Italian or English systems.

Parents and grandparents remain in the country, who, after retiring, are forced to rely on an increasingly narrow and powerless base of domestic contributors, increasing the scheme's deficit and receiving minimal pensions.

Adding to this difficult equation is the extension of the retirement enjoyment period, with the average years after retirement reaching 23 years from 22.4 years in 2021. Increased life expectancy is increasing the retirement enjoyment period from year to year, further increasing expenses.

With the increase in the number of pensioners, social pressure is being created. Last year, the government approved a monthly bonus in addition to the pension, which is less than 900 lek per month. Due to the problematic nature of pension policy, it often falls prey to electoral cycles and short-term interests, constantly postponing deep structural reforms until later, and this creates costs for all parties.

In 2021, for every old-age pensioner there were 1.42 active contributors in the system. In 2025, this ratio has dropped to 1.36. The difference of 0.06 points seems minimal, but the trend is ongoing.

If no intervention is made, the system is approaching a point where the contribution base will not be sufficient to cover the liabilities. In addition to the low number of contributors, Albania faces high wage informality.

According to official data, 27% of employees in the first quarter of the year paid contributions with a minimum wage. If a contributor pays contributions above a salary of 50.000 lek, but in the meantime earns 90.000 lek, the system receives only 40% of the contribution that he should receive.

354 thousand people, average pension 13,500 lek per month

In 2025, partial pensions accounted for 55.2% of total old-age pensions, expanding by 3 percentage points in one year, from 52.1% in 2024.

The partial pension category has seen strong growth, reaching 353,983 beneficiaries in 2025 from 316,781 in 2024, or plus 11.7%.

On the other hand, the number of full pension beneficiaries has decreased, dropping from 287,279 beneficiaries in 2024 to 283,677 in 2025, or -1.3%.

In recent years, the number of citizens who fail to complete their full working years and retire on a partial pension has been increasing. Official data from the Social Security Institute shows that the average payment for people with a partial pension was only 13,500 lek in 2025. Last year marked a real boom in terms of new urban pensions, with around 54,676 new beneficiaries.

Of these, only 7,723 people managed to benefit from a pension with full years of work. Meanwhile, the number of people who benefited from a partial pension was 42,594 people. This means that approximately 85% of new urban pensioners in 2025 have retired, without completing their full length of service and thus benefiting from pensions. In rural areas, the same trend is observed. During 2025, out of 333 new old-age pensions in rural areas, 208 of them were partial, while only 125 were with full years.

The benefit of a pension is calculated in relation to the years that a person has paid contributions against the period required by law, which is gradually increasing beyond 38 years. Most of these pensioners receive only a portion of the basic pension, often very close to the level of the social pension.

These amounts are insufficient to cover minimum living costs, especially in an environment where food and medical prices are rising and, on the other hand, other payments to employees have increased faster.

To survive, many elderly people who receive partial pensions are forced to continue working beyond retirement age, often informally.

The replacement rate is worsening.

The replacement rate is the percentage of salary that a person receives as a pension after leaving work. If they receive a certain salary while working and the pension is one-third of that, the replacement rate is 30%.

This indicator directly measures the state's ability to maintain a citizen's standard of living as they exit the labor market and enter old age.

According to standards set by the International Labour Organization (ILO), this rate should be at least 40% to ensure a minimum and dignified standard of living. On the other hand, the European Union aims for even higher levels, requiring consolidated systems to guarantee between 50% and 60% of the average wage.

Albania is currently 10 percentage points below the ILO minimum threshold and, instead of improving, the gap is widening and we are moving away from this standard year after year. The average pension was 30% of the average salary last year, deteriorating significantly from the level of 38% in 2021.

This decrease occurred because public and private sector wages increased at higher rates than pensions, significantly weakening the purchasing power of pensioners. The average national wage increased by 47% between 2021 and 2025, while the average pension increased by only 16%, reflecting only indexation by inflation.

The widening gap between wages and pensions comes at a time when rent prices, medicines, basic food and healthcare costs have risen sharply. With current payments, pensioners are being denied the most basic needs for survival. But the low pension payments also extend to the wider economy. The first effect is related to the contraction of consumption.

Since retirees spend their money almost entirely on basic goods such as food, healthcare and energy, the decline in their incomes hits consumption and retail trade. International research confirms that low-income seniors skimp on healthcare costs because they cannot afford them.

These decisions lead to delayed diagnoses and inadequate treatments, which sooner or later burden public hospitals as costly emergencies. An entire generation forced to make ends meet on only 30% of the average wage completely loses the capacity to participate in community life.

The inability to afford family visits, cultural activities, or even basic things like meat-based food or heating the house during the winter creates deep economic isolation for this group./Monitor