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Opinion / Editorial

Here is the scheme for indexation in value and percentage increase of pensions and other payments

Here is the scheme for indexation in value and percentage increase of pensions

Is it possible for the government to index the value of pensions, economic assistance, other payments and increase all pensions in percentage, with the same budget that the state spends on indexation. I think yes. Let's see below how it can be made possible. First we need to know what Inflation is and its consequences! Inflation is the percentage by which the prices of goods and services increase. For the same amount of money, you buy less goods than you bought before, because when prices rise, purchasing power decreases. Inflation is measured by the consumer price index. This shows how much money someone would spend on a purchase at a given time compared to a previous time. Inflation is measured monthly, quarterly, semiannually or annually. Inflation affects everyone who buys goods in the market, but the problem is who suffers the most. Of course, those who receive less income, such as those with economic assistance, pensioners, invalids, with low wages, etc. But even within these categories, there are those who receive less income and therefore the greatest consequences. Can and should those who receive less benefit more? If not more at least equally. How can adjustments be made within the indexation scheme to benefit those with lower incomes? Is the government obliged to index inflation? What layers, social categories and social groups! To say that the government has an obligation means that laws have been put in place to protect the social strata and categories of society that are affected by inflation. The Universal Declaration of Human Rights in article [1] states: "Everyone is born free and equal in dignity and rights. They have reason and conscience and should behave towards each other in a spirit of brotherhood." Whereas in article [3] it is stated: "Everyone has the right to live, to be free and to have private insurance." These rights are also sanctioned in the Constitution of Albania. Article 15 point [1] states: "The fundamental human rights and freedoms are indivisible, inalienable and inviolable and are the foundation of the entire legal order." While in article 59, point [e] it is stated that; The state, within the constitutional powers and the means available, as well as in addition to private initiative and responsibility, aims to: ...[e] care and assistance for the elderly, orphans, and the disabled; So this presupposes that the state must protect these layers and social categories not only to live, but also other personal rights that originate from the Constitution. However, in this case we are talking about the economic one.

How has indexing been implemented so far?

Until now, the government has indexed pensions to a certain percentage that it has deemed reasonable. When this figure was slightly higher than the figures given by INSTAT or the Bank of Albania, it was claimed as a slight increase in pensions. Even in political conversations, indexation has always been referred to as an increase in pensions. Percentage indexing is not fair, even discriminatory. I say this because when prices increase, every person who goes to the market to buy food and get basic services must pay the same for the products they need to consume. Here we are talking about basic products, as the basket that includes food and basic services is otherwise called. But the way that has been followed so far for indexing has caused the benefit to be largely disleveled. This may be true if the government decides to increase pensions as it does with wages, but not with indexation. Indexation must be separate from pension increases. So far this has not been done, but can both pillars be implemented with the index fund? For this let's take the last indexation that the government did in October of 2023 and the fund spent for this purpose.

In October 2023, the government indexed all pensions with the figure of 8.6% using a fund of 3.2 billion ALL for three months, or 1.07 billion ALL per month, 12.8 billion ALL for the 12 months of the year. How and how much lek did pensioners benefit from this indexation, according to the pensions they receive? The social pension was 8,540 lek, the minimum urban pension was 16,200 lek, the average was 32,400 lek, while there is no maximum limit, but it can be beyond 120,000 lek. We also have special pensions that are 10 times the social pension, i.e. 85,400 ALL. Let's analyze how much these pensioners who receive these pensions benefited.

 

a. Social pension, 8540 x 8.6% = 734 lek, or 9270 lek.

b. Minimum pension 16200 x8.6% = 1393 lek, or 17593 lek.

c. Average pension 32400 x 8.6% = 2786 ALL, or 35186 ALL.

d. Special Pension 85400 x 8.6% = 7344 ALL or 92744 ALL

e. High Pension 120,000 x 8.6% = 10,320 Lek or 130,320 Lek.

As can be seen above, the imbalance of the benefit is clearly visible, reaching up to 14 times that of the benefit from the social pension. Is this fair, when inflation affects everyone equally? This can be called an increase, but not indexation of pensions. But before the government thinks about increasing pensions, it must first index them to the same value of lek, based on the percentage of inflation. Until we have determined the vital minimum according to the methodology of the countries of the European Union, let's base it on the social pension as a point of reference. This is also for the reason that in some way it is designated as such for people without other income.

Si mund të bëhej e mundur që inflacioni të kombesohej me shifrën 8,6%, të pensionit social, gjithë pensionistët, ata që jetojnë me ndihme ekonomike, prindërit me shumë fëmijë, gratë e dhunuara, në proces divorci, jetimët etj, dhe rritjen në përqindje të pensoneve, vetëm me fondin 1,07 miliardë lekë në muaj. Në këtë mënyrë do zgjerohej mbrojtja e përfituesve e do kishim shpërndarje më të drejtë. Le të vazhdojmë të shtjelljojmë më tej arsyetimin me shifra konkrete.

Nga indeksimi 8,6% i pensionit social përfitimi do ishte 734 lekë, që duhet t’u shtohej gjithë pensionistëve pavarsisht nga pensioni që marrin. Duke e shumëzuar për 767 mijë pensionistë del një fond prej 562 milionë lekësh. Nëse kemi 68000 përfitues nga ndihma ekonomike që marrin më pak se pensioni social duhen edhe këta të indeksohen me të njëjtën vlerë. Për këta do të mjaftonte një fond prej 50 milion lekësh. Nga fondi 1,07 miliardë lekësh duke zbritur të dy fondet që nevojiteshin për indeksimin do të tepronin 458 milon lekë. Le ta përdorim këtë fond të mbetur për rritjen reale të gjitha pensioneve. Sa do ishte përqindja e rritjes? Për të llogaritur përqindjen duhet të gjejmë më parë sa lek I takon mesatarisht ?do pensionisti. Për këtë pjestojmë fondin e tepruar nga indeksimi me numërin e pensionistëve dhe del shuma prej 584 lekësh. Kjo shumë është mesatare që vlen vetëm për të llogaritur përqindjen që duhet për rritjen e përgjithëshme. ?’përqindje ze kjo shumë tek 16934 lekë, pas indeksimit të pensionit 16200 lekë? Bëjmë pjestimin dhe del shifra afërsisht 3,7%. Pra rritja e pensioneve duhet bërë me këtë shifër. Le të shohim sa shkojnë pensionet pas indeksimit dhe rritjes prej 3,7%.

 

1.      Pensioni social [8540 +734] x 3,7% = 324 lekë, pëfundimi 9613 lekë.

2.      Pensioni minimal [16200 +734] x 3,7% = 592 leke, ose 17560 lekë.

3.      Pensioni mesatar [32400 +734] x 3,7% = 1159 leke ose 34359 leke

4.      Pensioni I ve?antë [85400 +734] x 3,7% = 3014 leke ose 89320 leke.

5.      Pensioni I lartë [120000+734] x 3,7% = 4225 leke ose 125201 leke.

Te shohim diferencat e pensioneve mindis skemës së vjetër dhe skemës të propozuar, por me të njëjtin fond që qeveria kish vënë në dispozicion vetëm për indeksimin.

 

a.      Pensioni social. 9613 - 9270 = +343 leke

b.      Pensioni minimal, 17560 – 17593l = -33 leke

c.       Pensioni mesatar 34293 – 35186 leke = - 893 lekë

d.      Pensioni I ve?ante 89320 – 92774 = -3450 leke

e.       Pensioni I lartë 125201 – 130320 = -5119 leke.

 

In conclusion, we note that pensioners who received above the minimum pension limit to high ones have losses. But we have many benefits since the distribution becomes fairer and other social categories would be indexed with the same fund, such as those with economic assistance, abused women, those in the process of divorce, orphans, etc. If this scheme was applied years ago, today we would have another level of low pensions, and therefore other pensions. I do not claim that the proposed scheme is the best, but what needs to end is percentage inflation. This should be done in value and the same for everyone. If the increase in pensions may not be possible annually, indexation is an obligation possibly even in six months when inflation has unpredictable figures. The division of the fund into two pillars should also be planned because the indexation should take place in the first three months of the year and not, as often happens at different times. This would remove the insinuations that can be created during the campaign. Another thing would be for the real increase of pensions by stripping them of indexation, which could also create misunderstandings among the opposition if it happened on the eve of campaigns. But there can be no doubts at all when indexing is done. While for the year 2024, about 25 billion ALL are planned in the budget for the indexation of pensions. This figure has been mentioned several times by the Minister of Finance and the Prime Minister of the country in press conferences and is double the fund that was used in 2023 for the 8.6% increase. If the above scheme were followed, this budget would be sufficient not only for the indexation of all categories of persons who benefit from the state less than the social pension, but also for a significant increase in pensions. Even the increase would be in double digits even if the fund for the reward of the New Year 2024 is deducted. However, until then we are watching the government.