A – BASIC QUESTIONS

WHAT IS A VOLUNTARY PENSION FUND?
A voluntary pension fund is an open-end investment fund in which the voluntary pension insurance contributions are paid and which is established and managed by a Voluntary Pension Company or Joint Pension Company.

WHO SHALL MANAGE THE ASSETS OF THE VOLUNTARY PENSION FUNDS?
A Voluntary Pension Fund shall be managed by a Voluntary Pension Company or by a Joint Pension Company. The Company has to have a license and an approval issued by MAPAS.

WHO MAY BE COVERED WITH THE VOLUNTARY FULLY FUNDED PENSION INSURANCE?
The third pillar is designed to cover all persons older than 15 years and who are able and willing to pay additional contributions from their regular wages.

Members of the third pillar can become those:
• Persons who are covered with the mandatory pension insurance
• Persons who are not covered with the mandatory pension insurance and are willing to save for retirement
• Persons who shall have their contributions paid by a third person(s)

WHO SHALL SUPERVISE AND REGULATE THE THIRD PILLAR?
The Agency for Supervision of Fully Funded Pension Insurance (MAPAS) shall supervise and regulate the third pillar.

B – Licensing of Pension Companies

WHAT ARE THE CRITERIA FOR OBTAINING A LICENSE FOR ESTABLISHING A VOLUNTARY PENSION COMPANY?

Founders of a Voluntary Pension Company owning 51% or more of the Pension Company’s share capital may be a financial institution satisfying the following criteria:
• To have:

O Own assets of at least 9,000,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a license in the case of bank;

O Equity of at least 3,000,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a license in the case of insurance company;

O Equity of at least 500,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a license in the case of company for management of investment funds;

O Equity of at least 1,000,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a license in the case of foreign Pension Management Company;

O Equity of at least 5,000,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a license in the case of other Financial Institutions;
• Has been registered and existing for a minimum of three years;
• Continuous solvent existence in continuity, whether in the Republic of Macedonia or abroad;
• Permanent management team comprised of competent, expert and experienced persons.

A founder of a Voluntary Pension Company owning 51% or more of the share capital may be a legal entity that owns more than 50% of the management shares of a financial institution satisfying the above-mentioned criteria
A founder of a Voluntary Pension Company owning less than 51% of the share capital may be a legal entity satisfying the above-mentioned criteria, except the criterion for the minimum owned assets

WHAT ARE THE CRITERIA FOR OBTAINING A LICENSE FOR ESTABLISHING A JOINT PENSION COMPANY?
A founder of a Joint Pension Company shall be a legal entity satisfying the following criteria:

(a) Minimum capital of 20,000,000 Euros in MKD counter value at the middle exchange rate of the National Bank of the Republic of Macedonia at the date of application for a licence;
(b) Has been registered and existing for a minimum of three years;
(c) Continuous solvent existence in continuity, whether in the Republic of Macedonia or abroad;
(d) Permanent management team comprised of competent, expert and experienced persons.
If a foreign Financial Institution wants to become a founder, besides the above-mentioned criteria it must have for at least one year prior to that time a minimum investment grade level rating by reputable international rating agencies.
Founder of a Joint Pension Company who would own at least 51% of the initial capital of the Voluntary Pension Company can be a legal entity or a group of legal entities that have a minimum investment grade level rating according to renowned international credit rating agencies for at least one year before they apply to be founders.

WHAT IS THE MINIMUM SHARE CAPITAL THAT A MANDATORY PENSION COMPANY SHOULD HAVE IN ORDER TO BE A FOUNDER OF A VOLUNTARY PENSION COMPANY
The minimum share capital of a Joint Pension Company shall on establishment be no less than 1,800,000 Euros. A Mandatory Pension Company established by the Law on Mandatory Fully Funded Pension Insurance may also manage a Voluntary Pension Fund after receiving a license to perform business activity – managing Voluntary Pension Funds by the Agency for Supervision of Fully Funded Pension Insurance and after the change in the Central Register of the Republic of Macedonia, it shall be given by the Agency an approval to manage a Voluntary Pension Fund. The Agency shall grant the license if the Pension Company meets the legal requirements for establishing a Joint Pension Company including the requirement for a minimum share capital of 1,800,000 Euro. This means that if the Mandatory Pension Company has a share capital larger than 1,800,000 Euro in the moment of submitting the request for receiving a license to perform business activity – managing Voluntary Pension Funds it shall be considered that this Pension Company meets the requirement for minimum share capital.

C - Membership and Contributions

HOW CAN I BECOME A MEMBER OF THE THIRD PILLAR?
A person can become a member of a voluntary pension fund by signing a membership agreement with a sales agent of a Voluntary Pension Company or a sales agent of a Joint Pension Company and by paying a contribution by which for that person an individual account is opened. One can become a third pillar member by participating in an occupational scheme and by owning an occupational account in case the employer decides to provide additional pension insurance for its employees.


IS IT REQUIRED THAT THIRD PILLAR CONTRIBUTIONS BE PAID EACH MONTH AND IN WHAT AMOUNT?
The Law on Voluntary Fully Funded Pension Insurance does not stipulate explicit requirements for the payment of contributions, which means that the contributions do not have to be paid each month. The amount of paid contributions shall depend on the decision of the third pillar member and it is not required that the amount has to be the same upon each payment.

AM I ALLOWED TO PAY THE THIRD PILLAR CONTRIBUTION FOR MY DAUGHTER WHO LIVES ABROAD? WHEN CAN I START WITH THE PAYMENTS AND WHERE?
A person can pay the third pillar contribution for another person but the membership agreement has to be signed by the member, the sales agent and the third person who shall pay the contributions on behalf of the member. The contributions are paid on the individual account of the member after signing the membership agreement and after the account is opened. The payments are done on a special account of the Voluntary Pension Fund with the Custodian and afterwards are being allocated to the individual account of the member.

WHO SHALL PAY THE THIRD PILLAR CONTRIBUTION?
The payment of the voluntary pension contribution can be done by the members or by a third person, based on the membership agreement. Employers or citizens associations that organize and sponsor occupational schemes may also do the payment of the third pillar contribution. The payment of the contribution is done in the amount and in periods determined by the payer, meaning that there are no requirements for minimum or maximum limits of payments nor previously determined periods in which the payments must be realized. The payers pay the contributions whenever they are able to, and when contributions are not paid the members keep all the rights. The payments are done on a special account of the Voluntary Pension Fund with the Custodian and afterwards are being allocated to the individual account of the member.

WHEN EMPLOYERS PAY THE THIRD PILLAR CONTRIBUTIONS IS THERE A REQUIREMENT TO PAY ALSO THE PENSION AND DISABILITY CONTRIBUTION AND THE HEALTH CARE CONTRIBUTION?
The voluntary pension contribution is not part of the gross wage, therefore for the amount paid as a third pillar contribution there is no obligation for the contributions for pension and disability and health care.

I AM EMPLOYED AND I PAY THE CONTRIBUTION FOR THE FIRST AND THE SECOND PILLAR. WITH THE START OF THE THIRD PILLAR, CAN I CHOOSE BETWEEN THE SECOND AND THE THIRD PILLAR?
Since you are a member of one of the two pension funds operating in the second pillar you remain to be a member of the second pillar. Nevertheless, if you desire you can also be a member of the third pillar as a supplementary pension insurance that shall provide you with a higher pension benefit.

IS IT POSSIBLE NOT TO CHOOSE THE SECOND PILLAR ONLY THE THIRD (TOGETHER WITH THE FIRST)? (IF I STOP WORKING OR CHANGE MY JOB? – OR ANOTHER OPTION- IF I WAS PREVIOUSLY UNEMPLOYED?)
This is possible only for those contributors covered only with the first pillar (voluntary members, persons employed before January 1, 2003 who have not decided to switch to the second pillar in the legally prescribed period). Only these persons can be covered by the first pillar and if they choose the third as well, and are not obligated to be members of the second pillar.
Persons who are already members of the second pillar remain to be its members even if they stop working or change jobs. If they want, they can be members of the third pillar as well.

CAN WE EXPECT RETURNS ON THE ASSETS IN THE THIRD PILLAR PENSION FUNDS?
Paid assets, reduced for the fee from contributions, are accumulated on the individual account of the members together with the return on investments and represent the members’ future pension benefits from the third pillar.
Other advantage of the third pillar is the tax exemption for the member as well as for the employer in cases of occupational schemes.

D – Occupational Schemes

I AM AN EMPLOYER – WHAT CAN I DO IN MY COMPANY IN REFERENCE TO THE THIRD PILLAR?
As employers, you can provide and sponsor occupational schemes for your employees for which you should sign contracts with your employees and choose a pension company to manage your occupational scheme within the voluntary pension fund managed by the same pension company. In the occupational scheme, you can pay third pillar contributions for all your employees or just for a selected group, in the amount suitable to the financial condition of the company.


WHAT IS AN OCCUPATIONAL SCHEME AND WHO CAN ORGANIZE IT?
Occupational pension scheme means a scheme agreed between an employer and its employees or citizen association and its members, included in a voluntary pension fund. A group of employers or citizens associations can jointly organize and sponsor occupational schemes. The sponsor shall sign an agreement for organizing and financing an occupational pension scheme with representative of its employees or members and shall adopt the rules for the scheme. Each participant of the occupational pension scheme shall sign a statement for acceptance of participation in occupational pension scheme and shall submit it to the sponsor. The sponsor shall sing an agreement with the Pension Company chosen to manage the voluntary pension in which the occupational scheme is participating. The sponsor may determine which employees shall participate in the occupational scheme and the rate of contribution to be paid for them.

IS IT OBLIGATORY THAT THE CONTRACT BETWEEN THE PENSION COMPANY AND THE SPONSOR TO BE SIGNED BY A SALES AGENT OR IT CAN BE SIGNED BY A PENSION COMPANY’S REPRESENTATIVE?
The sponsor (employer or association) signs the contract only with an authorized signatory of the Pension Company managing the voluntary pension fund where the occupational scheme is included. The Sponsor may sign the contract with a sales agent but only if that sales agent is authorized by the Pension Company to sign such type of contracts.

E – Marketing

CAN A SECOND PILLAR SALES AGENT OPERATE AS A THIRD PILLAR SALES AGENT AS WELL?
The existing active sales agents can offer second and third pillar products. 

HOW WILL MARKETING ACTIVITIES BE PERFORMED?
No one but the Pension Company, established according to Law, may perform marketing activities nor offer voluntary pension funds, occupational schemes or similar pension arrangement.

General rules:
• No one may offer any gifts to another person for the purpose of persuading that person to join a voluntary pension fund or remain a member of a voluntary pension fund or to join an occupational pension scheme or to remain in an occupational pension scheme.
• Pension companies, affiliated persons and sales agents, as well employees of pension companies or affiliated persons must not give wrong and inaccurate information about a voluntary pension fund, occupational pension scheme or about the pension company managing that fund or information which may mislead the voluntary pension fund members, the persons who have a right to become voluntary pension fund members, persons who may have a right at a future date to became voluntary pension fund members, sponsors and prospective sponsors either orally, in written information, in advertisements or any other advertising material.
• Pension companies, affiliated persons and sales agents, as well employees of pension companies or affiliated persons must not make any statements or predictions about the future investment performance of the Voluntary Pension Fund.
• If the Agency considers that an advertisement or other written material may be misleading, it may with an act ban or delay its publication or distribution and order publishing of a correction of that material within a deadline that it will determine by itself.

IS IT ALLOWED FOR THE THIRD PILLAR SALES AGENTS TO PERFORM MARKETING ACTIVITIES IN THE WORKING PREMISES OF THE EMPLOYEES?
It is forbidden to perform marketing activities for a voluntary pension fund in the working premises of potential members. Responsible person must not advertise a voluntary pension fund to an employee except in those situations where an employer has organized an occupational pension scheme for its employees.

WHEN DOES MAPAS ORGANIZE THE SALES AGENT’S EXAM?
According to the Rulebook on the Manner and Procedure for Taking the Sales Agents’ Exam and Entering the Sales Agents Register, MAPAS organizes regular exams four times a year. The exams are taking place the last week of the following months: March, June, September and December. By exception, the Agency may organize the exams in shorter periods.
Sales agent of Mandatory Pension Companies, established before the passing of the Law on Voluntary Fully Funded Pension Insurance have taken a supplementary exam for the voluntary fully funded pension insurance and have registered again in the Sales Agents Register. 

F – Investment of Asset

HOW THE INVESTMENT OF THIRD PILLAR ASSETS IS GOING TO BE REGULATED?
The investment of the third pillar assets is regulated with the Law on Voluntary Fully Funded Pension Insurance and the secondary regulation, where the Agency closely prescribes the criteria for the countries, the quality of the instruments, and the conditions to be met by the stock exchange markets, in which pension funds assets can be invested.

WHERE THE THIRD PILLAR PENSION ASSETS CAN BE INVESTED?
The Voluntary Pension Fund assets can only be invested in the following instruments:
• Bank deposits with banks that are licensed by the National Bank of the Republic of Macedonia, provided that such deposits are interest bearing;
• Bonds, and other securities issued or guaranteed by the National Bank of the Republic of Macedonia;
• Certificates of deposit, commercial notes and bonds issued or guaranteed by banks that are licensed by the National Bank of the Republic of Macedonia;
• Mortgage backed securities issued by banks that are licensed by the National Bank of the Republic of Macedonia;
• Bonds and other securities issued or guaranteed by the Republic of Macedonia
• Shares issued by Macedonian joint stock companies other than investment funds, on the base of approval from the Securities and Exchanges Commission of the Republic of Macedonia, that are traded on the official market of the security stock exchange or other organized security market in the Republic of Macedonia, controlled by the Commission;
• Bonds issued by Macedonian joint stock companies other than banks, on the base of approval from the Securities and Exchange Commission of the Republic of Macedonia, that are traded on the official market of the security stock exchange or other organized security markets in the Republic of Macedonia, controlled by the Commission;
• Commercial notes issued by Macedonian joint stock companies other than banks;
• Participation units and shares of Macedonian investment funds authorized by the Securities and Exchange Commission of the Republic of Macedonia;
• Bonds and other securities issued by foreign Governments or central banks of the European Union member-countries and OECD member-countries;
• Debt securities issued by European Central Bank, European Investment Bank and World Bank;
• Debt securities with a investment grade level rating by reputable international rating agencies issued by municipalities, non-state foreign companies or banks of the European Union member-countries and OECD member-countries;
• Shares issued by foreign companies or banks with a investment grade level rating by reputable international rating agencies, traded on the main stock exchanges of the European Union member-countries and OECD member-countries;
• Participation units, shares and other securities issued by authorized open-end and close-end investment funds established in the European Union member-countries and OECD member-countries;
• Other forms of investment according to the regulations of the Agency, provided that such investments are not contrary to Article 134 of this Law, with a prior opinion of the Securities and Exchange Commission of the Republic of Macedonia.

WHAT WILL HAPPEN IF I AM NOT SATISFIED HOW MY THIRD PILLAR ACCOUNT IS MANAGED?
You have the right to transfer to another voluntary pension fund managed by another pension company. If you are not satisfied with the third pillar in general you can stop contributing, and you can withdraw the paid in assets, at earliest, 10 years prior to retirement age (i.e. at 52 for women and at 54 for men).

WILL VOLUNTARY PENSION FUNDS USE THE SAME CHART OF ACCOUNTS AS THE MANDATORY PENSION FUNDS?
The Agency shall prescribe one chart of accounts for the mandatory and voluntary pension funds.

G – Custody of Assets

WHO SHALL BE THE CUSTODIAN FOR THE THIRD PILLAR?
The Law on Voluntary Fully Funded Pension Insurance stipulates that the custodian for voluntary pension funds’ assets shall be a commercial bank licensed by the National Bank of the Republic of Macedonia for performing the custodial services and meeting the conditions of the Law on Voluntary Fully Funded Pension Insurance.

WHAT ARE THE CONDITIONS THAT A BANK MUST FULFILL IN ORDER TO BE A CUSTODIAN?
The Custodian of domestic assets can be a bank holding a current banking license issued by the National Bank of the Republic of Macedonia. In order to provide custodian functions for the Voluntary Pension Funds, the Custodian must fulfill the following terms and conditions:
• To have minimum own assets of 9,000,000 Euros in MKD counter value at the exchange rate of the National Bank of the Republic of Macedonia, according to the definition for own assets in the Banking Law and authorization from the National Bank of the Republic of Macedonia for undertaking activities as custodian;
• Neither to be shareholder in the Pension Company which manages the Voluntary Pension Fund whose assets it keeps, nor a shareholder in an asset manager of such Voluntary Pension Fund nor a shareholder of an entity which is an affiliate entity and/or person to the Pension Company, and must not maintain any other capital relationship between these entities;
• Must not have any employees or members of its Management Board or Supervisory Boards who are Employees of or members of the Management Board, Supervisory Boards or a General Manager and Manager of the Pension Company that manages the Voluntary Pension Fund whose assets it keeps nor of its asset manager and not to be in such relationships with other persons who are affiliate entities and/or persons of the Pension Company or its asset manager.

AS I UNDERSTAND THE LAW, THERE ARE NO LIMITATIONS FOR CROSS-CUSTODY I.E. THE BANK IS LIMITED IN BEING THE CUSTODIAN OF ITS OWN PENSION FUND BUT IT CAN BE THE CUSTODIAN TO OTHER PENSION FUNDS.
Yes, if a bank is a founder or an affiliated person to a Pension Company this bank cannot be the custodian of the pension fund managed by the Pension Company where the bank is the founder or affiliated person. However, the same bank can be the custodian of a pension fund managed by another Pension Company. 

H – Withdrawals

CAN I USE MY THIRD PILLAR SAVINGS BEFORE I RETIRE? WHEN AND HOW CAN I USE THESE SAVINGS?
The assets from the third pillar can be withdrawn, at earliest, 10 years prior to the retirement age stipulated in the Law on Pension and Disability Insurance (at present, this means that the third pillar savings can be withdrawn at 54 for men and at 52 for women). Only in cases of disability or general incapability to work, a person can withdraw the third pillar savings earlier than prescribed. In case a member dies the amount standing to his/her account shall be treated as part of his or her estate pursuant to the Law of inheritance. The third pillar savings can be used by purchasing annuity, programmed withdrawals, lump sum payments, and payments on installments or a combination of all of the above.

I – Taxation

DEFINITION OF THE EET TAX TREATMENT
The Law on Voluntary Fully Funded Pension Insurance stipulates a tax treatment where the third pillar contributions is tax exempted, the investment returns on pension funds and occupational scheme assets are also tax exempted, while the pension benefit upon retirement is taxed. Therefore, with this Law the tax treatment known as EET is applied (exempt-exempt-tax).

ARE THERE TAX EXEMPTIONS FOR A PERSON CONTRIBUTING IN THE THIRD PILLAR?
There are tax exemptions foreseen for the third pillar for the maximum amount of six average salaries. Meaning:
A Sponsor shall be exempt from personal income tax in respect of contributions for its employees or members paid to the Voluntary Pension Fund. The exemption for one calendar year may not exceed 6 average monthly net salaries in the Republic of Macedonia, published for the previous year, per employee or per member.
A member of a Voluntary Pension Fund who, from its own assets, makes contributions to the Voluntary Pension Fund, or for whom assets are paid by another individual, shall be granted Personal Income Tax Return calculated on the amount of contributions paid into the Voluntary Pension Fund. The amount on which the return shall be calculated for one calendar year may not exceed 6 average monthly net salaries in the Republic of Macedonia, published for the previous year. Tax returns for all members shall be made annually directly in the Voluntary Individual Account of the member of the Voluntary Pension Fund.

WITH THE EET METHOD OF TAXATION APPLIED, WHEN AND HOW DOES ONE PAY THE TAX ON THE PENSION BENEFIT, UPON EACH PAYMENT OF THE BENEFIT OR AT ONCE?
This shall be additionally regulated with the law on pension benefits payout or with the Law on Personal Income Tax.

WHEN AN INDIVIDUAL PAYS THE CONTRIBUTION, DOES HE/SHE PAY THE GROSS AMOUNT AND WHAT AMOUNT AS PERSONAL INCOME TAX SHALL BE RETURNED TO HIS/HER ACCOUNT? E.G. IF THE ANNUAL PAID CONTRIBUTION IS 600 EURO, WILL HE/SHE HAVE 60 EURO RETURNED ON THE ACCOUNT (THE TAX RATE BEING 10%)?
When an individual pays the third pillar contribution in a voluntary pension fund, he/she pays from already taxed income, meaning net income, for which the State returns the exceeded tax payment. So, if a member pays annually 600 Euro of voluntary contribution (with the personal income tax rate being 10%), than the State shall return 66.67 Euro on the individual account of that member.

WILL THE PAID CONTRIBUTIONS FOR THE EMPLOYEES IN THE OCCUPATIONAL SCHEME BE ACCEPTED IN THE TAX BALANCE SHEET OF THE COMPANY PAYING FOR ITS EMPLOYEES?
The Law on Voluntary Fully Funded Pension Insurance regulates the exemption from the personal income tax for paid contributions for the employees in the occupational scheme but it does not regulate the payments for the voluntary fully funded pension insurance from the aspect of profit tax. Since the third pillar, contributions are net part of the gross wage of the employees, according to the Profit Tax Law they are not accepted as expenditures in the tax balance sheet of the employer.

IN THE THIRD PILLAR, WHAT ARE THE TAX RELIEVES AND THE ADVANTAGES FOR THE EMPLOYERS AND THE EMPLOYEES DEPENDING ON THE PAYMENT OF CONTRIBUTIONS- ON THE INDIVIDUAL ACCOUNT OR OCCUPATIONAL SCHEME ACCOUNT?
According to the Law on Voluntary Fully Funded Pension Insurance a Sponsor shall be exempted from personal income tax in respect to the contributions for his employees paid to the Voluntary Pension Fund. The exemption for one calendar year may not exceed six average monthly net salaries in the Republic of Macedonia, published for the previous year, per employee or per member.
A member of a Voluntary Pension Fund who, from its own assets, makes contributions to the Voluntary Pension Fund shall be granted personal income tax return calculated on the amount of contributions paid into the Voluntary Pension Fund. The amount on which the return shall be calculated for one calendar year may not exceed six average monthly net salaries in the Republic of Macedonia, published for the previous year.
A Member of a Voluntary Pension Fund, for the assets paid into the Voluntary Pension Fund by other individual, shall be granted personal income tax return calculated on the amount of contributions paid into the Voluntary Pension Fund. The amount on which the return shall be calculated for one calendar year may not exceed six average monthly net salaries in the Republic of Macedonia, published for the previous year.

J – Fees

WHAT ARE THE FFES CHARGED IN THE THIRD PILLAR?
To get your answer go to the following link Fees in the Third Pillar