Pension system intitutions

The Fully Funded Pension Insurance Supervision Agency was established for the purpose of supervising pension companies operations and pension funds with the ultimate goal of member’s interest protection (insured persons) and retired members of pension funds. The Agency has the capacity of a legal entity and is accountable for its work in frot of the Assembly of the Republic of North Macedonia.

The Agency is responsible for issuing, withdrawing and revoking licenses for pension companies’ foundation, licenses for performing activity – pension funds management and issuance, withdrawal and revocation of approvals for management of mandatory and voluntary pension funds. It supervises pension companies operations, mandatory and voluntary pension funds, as well as property custodians and foreign asset managers.

Moreover, the Agency promotes, organizes and encourages the development of fully funded pension insurance in the Republic of North Macedonia, in cooperation with the Ministry of Labor and Social Policy and develops public awareness of the goals and principles of pension companies and mandatory and voluntary pension benefits, the benefits of membership in a mandatory and / or voluntary pension fund, including the objectives, principles and benefits of participating in an professional pension scheme, the members rights of mandatory and voluntary pension funds and other issues related to fully funded pension insurance.

The Agency adopts acts in accordance to the laws in the field of fully funded pension insurance as well as expert instructions, manuals, etc., related to fully funded pension insurance and initiates the adoption of regulations and other acts related to pension companies and the pension funds they manage. The Agency cooperates with the Ministry of Finance, the National Bank of the Republic of North Macedonia, the Securities and Exchange Commission, the Insurance Supervision Agency and other institutions in order to ensure effective control of the fully funded pension insurance in North Macedonia.

In addition to the annual report on its operations, the Agency prepares and publishes an annual report on the situation in the fully funded pension insurance, which ensures transparency in this insurance.

A pension company is a joint stock company that is established and operates in accordance to the Law on Trade Companies and the Law on Mandatory Fully Funded Pension Insurance, or the Law on Voluntary Fully Funded Pension Insurance. A pension company is established on the basis of a license from MAPAS and manages a pension fund on the basis of a pension fund management approval. In the pension system there is a possibility to establish three types of companies:

• Mandatory pension fund mnagement company,
• Voluntary pension fund management company,
• Mandatory and voluntary pension fund management company

In the Republic of North Macedonia there are 3 Companies for mandatory and voluntary pension funds management.

Mandatory and voluntary pension fund management company should have a basic capital in the amount of at least 1.8 million euros in denar counter value according to the middle exchange rate of the National Bank of RSM, mandatory pension fund management company should have a basic capital of at least 1.5 million euros and a company for management of voluntary pension funds should have a share capital of at least 0.5 million euros. In case of assets increase of the mandatory and / or voluntary pension fund managed by the pension company, the company is obliged to increase the capital in accordance with the legal provisions.

The only activity of the pension company is the pension funds management, their representation before third parties and activities that directly arise from the pension funds management operations.

The main responsibilities and activities of the pension company are: membership, asset management, risk management and risk mitigation control mechanisms, administration and record keeping, compliance with laws and bylaws, regular reporting to members, the public and MAPAS, payment of retired persons programmed withdrawals payment, etc.

The pension company operates in accordance to the rules for good company corporate governance and has a fiduciary duty to work only for the benefit of the members and retired members of the pension fund it manages, which should be implemented by applying high standards of ethics and integrity and no conflict of interest. In order to perform these functions, the pension companies, in accordance to the law, charge three types of compensation.

Pension fund (mandatory or voluntary) is an open investment fund, which is established and operates in accordance to the Law on Investment Funds, unless otherwise regulated by the Law on Mandatory Fully Funded Pension Insurance or the Law on Voluntary Fully Funded Pension Insurance.

The mandatory pension fund consists of the contributions and assets of the members, the assets of the retired members and the incomes from the invested contributions and funds, reduced for the fees collected from the mandatory pension fund.

The voluntary pension fund consists of voluntary contributions, paid on behalf of the members, members ‘funds, retired members’ funds and the contributions from the invested contributions and funds, reduced for the fees collected from the voluntary pension fund.

The owners of the pension fund are its members and retired members, and their individual ownership rights are determined by the amount of funds on their accounts. The pension fund assets may not be subject to claims, nor may those assets be enforced by, or on behalf of, the pension company creditors that manage that pension fund.

A custodian is an institution entrusted with the responsibility of keeping the pension fund assets, and its functions related to keeping the assets defined in the Law on Mandatory Fully Funded Pension Insurance, that is in the Law on Voluntary Fully Funded Pension Insurance in Case on custody of the assets of a voluntary pension fund.

All instruments in which the pension fund assets are invested must be kept by a custodian. The company is obliged to choose a sole property custodian, to whom it entrusts the responsibility for keeping the pension fund assets and with which it concludes a contract for property keeping.

The mandatory pension funds assets custodian in the initial period was the National Bank of the Republic of North Macedonia (as a transitional solution), but now we have moved on to the systemic solution according to which the mandatory pension funds assets custodian is a commercial bank license issued by the National Bank of the Republic of North Macedonia and which meets the requirements set out in the Law on Mandatory Fully Funded Pension Insurance.

The voluntary pension funds assets custodian is a commercial bank that has a license issued by the National Bank of the Republic of North Macedonia and that meets the requirements set out in the Law on Voluntary Fully Funded Pension Insurance.

The social security of the citizens of the Republic of North Macedonia is a state constitutional obligation with the pension and disability insurance being the main component of the insurance system.

The Ministry of Labor and Social Policy is responsible for creating a pension and disability insurance policy and for supervising and controlling the implementation of this insurance. At the same time, this ministry promotes and monitors its development in order to ensure a secure and stable pension system in the long run.

The Ministry supervises the operation and legality of the work of the Pension and Disability Insurance Fund of North Macedonia.

The realization of the rights from the pension and disability insurance on the basis of generational solidarity is done through the PADIFNM Fund. In the reformed pension system, it takes care of the first pillar, and in addition to the existing competencies, it gets new functions related to the second pillar, among which the most important are:

• distributes pension insurance contributions between the first and second pillars and transfers contributions to the mandatory pension funds for members; and
• harmonizes the paid contributions with the received data and submits data to the companies for the performed transfer.

In order to implement these functions, the PADIFNM maintains a database for the persons included in this insurance and for the selected mandatory pension fund.

The Public Revenue Office (PRO) performs centralized collection of contributions and submits the total contributions for pension and disability insurance to the PADIFNM Fund.