Kosovo: Access to up to 10% of the mandatory individual account to weather COVID-19

Submitted by mmarquez on Mon, 02/01/2021 - 11:26
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Social Security Admninistation (31.01.2021) As part of its efforts to provide relief to individuals and businesses affected by the COVID-19 pandemic, Kosovo enacted a law on December 7 that allows participants of the country's mandatory individual account pension program to withdraw up to 10 percent of their account balances. According to the law outlining the package, withdrawals from all individuals with savings under 9,999 euros will be reimbursed by the Government from 2023 onwards. Based on KPST data, this means 91 percent of all contributors will be reimbursed if they withdraw their savings, while only nine percent have more than 10,000 euros total savings and thus do not qualify for compensation.

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As part of its efforts to provide relief to individuals and businesses affected by the COVID-19 pandemic, Kosovo enacted a law on December 7 that allows participants of the country's mandatory individual account pension program to withdraw up to 10 percent of their account balances. According to the law outlining the package, withdrawals from all individuals with savings under 9,999 euros will be reimbursed by the Government from 2023 onwards. Based on KPST data, this means 91 percent of all contributors will be reimbursed if they withdraw their savings, while only nine percent have more than 10,000 euros total savings and thus do not qualify for compensation.

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Kosovo Allows Special Withdrawals from Mandatory Individual Accounts

As part of its efforts to provide relief to individuals and businesses affected by the COVID-19 pandemic, Kosovo enacted a law on December 7 that allows participants of the country's mandatory individual account pension program to withdraw up to 10 percent of their account balances. (Other measures of the law include €200 million [US$245.4 million] in aid to businesses, payments of €300 (US$368.13) a month from October 2020 to December 2020 to workers who lost their jobs, and reductions in the value-added tax on raw materials.) Participants may request the tax-free withdrawals by submitting applications online to the Kosovo Pension Savings Trust (KPST, an independent public entity that manages the program) within 4 months of the law's enactment. According to the KPST, 394,978 participants have withdrawn around €184 million (US$225.8 million) from the program, out of €2 billion (US$2.5 billion) in total assets, as of December 30.

Kosovo's old-age pension system was introduced in 2002 and consists of a universal basic pension program, mandatory individual accounts, and voluntary private pensions. (Other benefits are available to certain individuals, including members of the military and individuals who contributed to the former Yugoslav pension system for at least 15 years.) The universal program is funded by general revenue and provides a basic monthly pension (linked to the cost of a minimal food basket) to all resident citizens of Kosovo aged 65 or older. The mandatory individual account program is funded by employer and employee contributions (each contribute 5 percent of the employee's gross salary), and covers all public- and private-sector workers. Upon reaching the normal retirement age of 65, benefits are paid as a lump sum or a monthly pension, depending on the account balance.