The pension system in the Republic of North Macedonia consists of pension and disability insurance on the basis of generational solidarity and fully funded pension insurance, which enables the citizens of the Republic of North Macedonia material and social security.
The structure of the multi-layered pension system is based on three types (pillars) of insurance:
- Compulsory pension and disability insurance based on generational solidarity (first pillar),
- Mandatory fully funded pension insurance (second pillar),
- Voluntary fully funded pension insurance (third pillar).
Compulsory pension and disability insurance based on generational solidarity (first pillar) is an insurance organized according to the principle of ongoing financing (pay-as-you-go), which means that current insured persons pay for the current retirees. This pillar operates on the principle of defined pensions, that is, through this pillar pensions are provided according to a predetermined formula that depends on the amount of salaries and the years of pension experience of the insured person. This pillar ensures the realization of rights from the pension and disability insurance in case of age, disability and death, which means that part of the old-age pension is paid, then disability pension, family pension, as well as the lowest amount of pension.
Mandatory fully funded pension insurance (second pillar) is insurance based on capitalization of assets, on the principle of defined contributions, where there is a close relationship and dependence between the volume of invested funds – contributions and future pension benefits earned by each person based on market laws. Namely, this way of insurance is based on the principle of collecting funds by paying contributions to individual accounts whose funds are further invested and the profit reduced by the operating costs of the system is added (accumulated) to the individual accounts funds.
Each insured person can choose only one mandatory pension fund. The invested funds are invested according to strictly established legal regulations, thus ensuring the highest protection of the interests of the members and their assets. In the mandatory pension funds, each member has its own individual account on which the funds from the contributions that each member allocates from one’s salary are kept. The funds set aside from the salary, together with the return on investment, belong to the member and enter the pesnsion amount formation. Members are regularly informed about their own funds set aside for retirement days.
Voluntarily fully funded pension insurance (third pillar) is also insurance based on capitalization of assets, on the principle of defined contributions, but on a voluntary basis. It is important for this insurance that it can include all persons who want to provide a higher volume of material security in addition to the compulsory insurance, as well as all persons who are not covered by compulsory insurance (in the first and second pillar). In addition, the third pillar provides for the establishment and financing of professional (occupational) pension schemes.
Each insured person can have one voluntary individual account in a voluntary pension fund and one professional account in a voluntary pension fund. The invested funds are invested according to strictly established legal regulations, which ensures the highest protection of the interests of the insured persons and their assets. Members are regularly informed about their own funds set aside for retirement days.
The payment of the contributions for pension and disability insurance is made by the debtor for contributions that is, the employer, on behalf of the employee. The Public Revenue Office performs integrated collection of compulsory social insurance contributions (pension and disability insurance contribution, health insurance contribution and employment contribution in case of unemployment) and personal income tax.
For the insured persons who are included in the two-pillar system, the PADIFNM Fund distributes the paid contribution between the first and second pillar. The amount of the contribution, which is transferred to the mandatory pension fund, is 6% of the gross salary, and in the PADIFNM remains the contribution in the amount obtained as the difference between the total contribution for pension and disability insurance and the contribution paid to the mandatory pension fund.
Second pillar contribution rates since the system beginning
|Period||Total contribution rate for pension and disability insurance||Contribution rate paid to the PADIFNM Fund||Rate of contribution paid in mandatory pension fond|
|1.1.2006 г. -31.12.2008г.||21,20%||13,78%||7,42%|
|1.1.2009 г. – 31.12.2009 г.||19,00%||12,35%||6,65%|
|1.1.2010 г. – 31.07.2012 г.||18,00%||11,70%||6,30%|
|1.8.2012 г. -31.12.2018 г.||18,00%||12,00%||6,00%|
|since 1.1.2019 г.||18,40%||12,40%||6,00%|
|since 1.1.2020 г.||18,80%||12,80%||6,00%|
The payment of a voluntary contribution, on behalf and for the account of a member who has a voluntary individual account, can be made by the member and / or the payer. The voluntary contribution payment, on behalf and for a member who has a professional account, can be made only by the insurer. Payments are made from the transaction account of the member and / or the payer or insurer. The voluntary contribution is paid to a special voluntary fund account, which is kept with the custodian and is distributed to a voluntary individual account, or to a professional account of the member, depending on the membership manner and after meeting the membership conditions.
The member, the payer and the insurer have the right to freely determine the amount of the voluntary contribution paid and the payment dynamics and the change of the payment amount, or the payment termination do not affect the right to membership in the fund, that is do not imply membership termination. The amounts of voluntary contributions are determined by the insurer, for all participants in the professional pension scheme, which they organize and finance and determine as a percentage of the member salary, who is included in the professional pension scheme.