Coefficients, how calculations are made for newly retired people

For newly retired persons, the Social Security Institute will apply the new salaries for the purpose of calculating pensions.

The update of salaries before '94 will be done with the coefficient of 13.5 percent, unlike a year ago, thus reflecting the level of salaries for 83 professions. For the last two years, i.e. for 2023 and 2024, the indexation formula is not applied, but salaries are referred to as they are, i.e. unindexed. The decision is taken by the Administrative Council at the Social Security Institute every year in July.

Every year, approximately 20,000 citizens who retire benefit from salary updates in order to increase the amount of benefits. The coefficient is expected to increase the estimated base for over 20,000 people, enabling their pensions to be harmonized with the contributions paid.

WHO BENEFITS

As every year, in addition to the indexation of pensions, the government also drafts new coefficients, on the basis of which the pension amount is calculated for those who are just retiring and not for all pensioners. This automatically brings a change in the formula for calculating the value that the elderly benefit from. Thus, based on the table with the new coefficients (according to the table next to the article) a person who in 1994 was treated with a salary of 7 thousand lek, this amount will be multiplied by the coefficient 10,799 and for calculating the pension, the salary of 75 thousand and 593 lek will be taken into account.

Usually, the salary with which contributions have been paid over the years is taken into account when determining the pension amount, but because salaries during the time of the former agricultural cooperatives, but also in the following years, have been low, the government sets new coefficients every year to obtain a pension that is as realistic as possible for the period that pensioners live.

FORMULA

The formula used to calculate the pension is: PP (Old Age Pension) = PS (Social Pension)* (multiplied) actual contributory seniority/required contributory seniority + 1/100* (multiplied) years of insurance* BV (estimated base).

The estimated base for calculating pensions is calculated as the ratio of the amount of wages, for which contributions have been paid, to the period known as the insurance period. For the insurance period from 1.1.1994 onwards, for calculating the estimated base, the amount of wages, for which contributions have been paid from 1.1.1994 until the end of the insurance period is taken. For the insurance period in state institutions and enterprises before 1.1.1994, for calculating the estimated base, the reference wages, determined by decision of the Council of Ministers, are taken. For the insurance period in former agricultural cooperatives, for calculating the estimated base, the reference wages determined by decision of the Council of Ministers are taken.

In cases where the insured person has an insurance period before and after 1.1.1994, the estimated base is calculated as the weighted arithmetic average of the estimated base of the insurance periods, as a former employee of state institutions or enterprises and former member of agricultural cooperatives before 1994, as well as of the insurance periods as an employed, self-employed or economically active person after 01.01.1994./Gazeta Panorama