Albania proposes new EU-Aligned Rules to Strengthen Oversight of private Pension Funds
Proposed amendments would tighten governance, risk management and transparency requirements while protecting workers’ accumulated pension rights and preparin...
Albania is preparing a significant reform of its private pension system through legal amendments intended to bring domestic rules fully into line with European Union standards. The proposed legislation would strengthen oversight (mbikëqyrje) of private pension funds and the companies responsible for managing citizens’ retirement savings. It would also introduce stronger governance (qeverisje) requirements governing how pension institutions are organised and controlled. Greater transparency (transparencë) for members is another central objective as Albania attempts to increase confidence in private retirement saving.
The Ministry of Finance placed the amendments to Law No. 76/2023 “On Private Pension Funds” into public consultation in September 2026. The reform seeks full alignment (përafrim) with the European Union’s IORP II Directive governing institutions for occupational retirement provision. Albania’s existing pension framework would therefore undergo further harmonisation (harmonizim) with European rules as part of the country’s accession process. The changes remain a proposal (propozim) at this stage and must complete the legislative process before becoming binding law.
The Financial Supervisory Authority, known as AFSA, is at the centre of the reform because it supervises Albania’s non-bank financial markets. Under the proposal, AFSA would receive broader supervisory powers (kompetenca mbikëqyrëse) over pension funds and their management companies. Regulators would obtain stronger tools for identifying institutional deficiencies (mangësi) before they create serious losses for members. This more proactive (parandalues) approach follows the European model of supervision based on governance, risk and member protection rather than relying only on intervention after problems appear.
One important area concerns the internal organisation of private pension funds and their management companies. Institutions would be required to maintain a clearer allocation of responsibilities (ndarje përgjegjësish) among managers, boards and specialised control functions. Stronger internal accountability (llogaridhënie) should make it easier to determine who is responsible when procedures are not followed correctly. The reform also seeks greater segregation (ndarje funksionale) between functions that could otherwise create conflicts of interest.
Risk management is another major focus because pension funds invest money that may remain under management for decades before members retire. The proposed rules strengthen the requirement for a dedicated risk-management function (funksion i administrimit të rrezikut) capable of identifying threats to pension assets. Institutions would need better procedures for monitoring liquidity risk (rrezik likuiditeti), investment concentration and operational problems. More sophisticated risk assessment (vlerësim rreziku) should help managers respond before financial difficulties threaten members’ retirement savings.
Internal auditing would also become more important under the new framework. Pension institutions would need an effective internal audit (auditim i brendshëm) function capable of examining whether systems and controls actually work as intended. That function should possess sufficient independence (pavarësi) from day-to-day management to identify weaknesses objectively. Regular scrutiny (shqyrtim) of procedures is intended to reduce the risk that poor management practices remain undetected for long periods.
The European framework also requires specialised functions to operate objectively and without inappropriate interference. Albania’s amendments therefore strengthen requirements concerning professional competence (kompetencë) and integrity among people holding important management or control positions. Officials performing key functions must possess appropriate expertise (ekspertizë) for the responsibilities assigned to them. This emphasis on professionalism (profesionalizëm) is intended to reduce the possibility that retirement assets are managed by individuals without sufficient experience or technical knowledge.
A particularly important reform concerns the separation of pension assets from the assets of the company or employer connected with the scheme. Members’ savings must remain legally segregated (të ndara juridikisht) from the property of the sponsoring employer or management company. This provides protection in the event of insolvency (paaftësi paguese) because creditors should not be able to use employees’ pension savings to settle unrelated company debts. Such ring-fencing (ndarje mbrojtëse) is one of the most important safeguards for ensuring that retirement assets remain reserved for members and beneficiaries.
The proposed legislation establishes stronger financial requirements for companies managing pension funds as well. Management companies would need minimum capitalisation (kapitalizim) of €125,000. Additional own funds (fonde të veta) would be required according to the volume of assets under management, including an additional calculation for assets exceeding €250 million. This financial buffer (rezervë financiare) is intended to ensure that management companies possess sufficient resources to operate responsibly and withstand unexpected problems.
Protection for workers who change employers is another major element of the reform. Employees leaving a company-sponsored pension scheme would retain their accrued rights (të drejta të fituara) rather than automatically losing benefits accumulated before the employment relationship ended. Their pension entitlements (të drejta pensioni) would remain protected if they transferred to another employer. The maximum vesting period (periudhë për fitimin e të drejtës) for employer-paid contributions would also be limited to three years, preventing workers from waiting excessively long before acquiring ownership rights over those contributions.
Employers sponsoring pension arrangements would also face stronger information obligations toward workers before they join. Prospective members must receive clearer disclosure (informacion shpjegues) about how the pension scheme operates and how leaving employment could affect their rights. Workers would consequently have greater foreseeability (parashikueshmëri) when evaluating whether participation is suitable for them. Better information should reduce ambiguity (paqartësi) over what happens to pension savings when a person changes jobs.
Transparency concerning investment performance would increase significantly for pension members. When individuals bear investment risk or can choose among investment options, they must receive information about historical performance (performancë) covering at least the previous five years where available. Returns would need to be presented in both nominal and real terms (terma realë) so members can understand the effect of inflation. Greater comparability (krahasueshmëri) should make it easier for savers to evaluate whether their pension fund has produced satisfactory long-term results.
Fees and costs would similarly have to become more visible. Members should receive clearer information concerning charges (tarifa) deducted from their pension savings. Greater cost disclosure (deklarim) matters because apparently small annual fees can significantly reduce retirement wealth when they accumulate over several decades. Improved cost transparency (transparencë e kostove) would allow consumers to compare pension products more effectively before deciding where to invest their long-term savings.
The European model also places considerable emphasis on giving each member understandable information about their expected retirement outcome. Pension institutions would provide projections showing possible future benefits (përfitime) under different assumptions. Such scenario analysis (analizë skenarësh) can demonstrate how contributions, investment returns and retirement age influence eventual pension income. An annual Pension Benefit Statement (pasqyrë e përfitimeve të pensionit) can consequently transform an abstract savings balance into information that is more useful for retirement planning.
Investment policy would also be governed more explicitly by the principle that assets must be managed in members’ long-term interests. Fund managers would have a clear fiduciary orientation (orientim në interes të anëtarëve) when making investment decisions. Portfolios should balance security, quality, liquidity (likuiditet) and expected returns rather than pursuing returns without adequate consideration of risk. Stronger rules on conflicts of interest (konflikte interesi) would require investment decisions to prioritise members even when managers or associated companies could benefit from an alternative transaction.
Environmental, social and governance considerations would become more visible in pension investing for the first time. Fund managers may need to consider the long-term effect of investment decisions on ESG factors (faktorë mjedisorë, socialë dhe të qeverisjes). This does not automatically require funds to abandon traditional financial criteria (kritere financiare) when selecting assets. Instead, it recognises that environmental or governance risks (rreziqe) can influence long-term investment performance and therefore deserve consideration within professional portfolio management.
Depositaries, the institutions responsible for safeguarding pension assets, would also assume greater responsibility. A depositary could face liability (përgjegjësi) for losses resulting from its own actions or from certain third parties to which asset custody has been delegated. Stronger custody (ruajtje e aktiveve) rules are intended to protect members when assets are held outside the pension management company itself. This additional safeguard (garanci mbrojtëse) strengthens the chain of responsibility surrounding retirement savings.
The legislation additionally prepares Albania for cross-border pension activity after it eventually becomes an EU member. Albanian pension managers could in future operate certain occupational schemes in another member state through cross-border activity (veprimtari ndërkufitare). European institutions could likewise obtain greater market access (qasje në treg) to manage eligible schemes connected with sponsors in Albania. This future integration (integrim) would connect Albania’s private pension market more closely with the much larger European retirement-services market.
Cross-border transfers of pension schemes and assets would also become possible under defined conditions. Members would receive protections intended to prevent a transfer from weakening their acquired rights (të drejta të fituara). The proposal requires prior consent (pëlqim) from a simple majority of affected members and beneficiaries for certain transfers. Such requirements provide a democratic safeguard (masë mbrojtëse) against pension assets being moved internationally without adequate involvement of the people whose retirement savings are affected.
Albanian residents living elsewhere in the European Union could eventually benefit from more portable pension arrangements as well. The framework allows pension payments (pagesa pensioni) and other benefits to be made to eligible members residing in another EU country once the relevant provisions become applicable. Greater pension portability (transferueshmëri) is increasingly important in a labour market where employees may spend their careers in several countries. This helps prevent worker mobility (lëvizshmëri) from becoming a disadvantage when building long-term retirement savings.
The reform comes while Albania’s private pension market is expanding but remains small compared with the compulsory public pension system. At the end of 2025, private funds had 49,218 members, representing an annual increase (rritje) of 11.19 percent. Net assets showed even faster growth (zgjerim), reaching approximately 10 billion lek according to AFSA’s year-end reporting. Seven pension funds managed by four management companies formed the market, showing that private pensions remain a relatively concentrated (i përqendruar) segment of Albania’s financial system.
Participation remains limited despite this growth. In September 2025, private pension participants represented only about 6.4 percent of the number of contributors to Albania’s public social-insurance scheme. This comparatively low penetration (depërtim) shows that supplementary retirement saving has not yet become widespread among Albanian workers. Expanding coverage (mbulim) will require stronger confidence as well as products that workers consider affordable and understandable. Better consumer protection (mbrojtje e konsumatorit) could therefore contribute indirectly to market growth by reducing fears about placing long-term savings in privately managed institutions.
The investment structure of Albanian pension funds also remains extremely conservative. At the end of 2025, approximately 96.02 percent of private pension assets were invested in Albanian government bonds, demonstrating extraordinary concentration (përqendrim) in a single broad asset class. Government securities can provide relative stability (stabilitet), but limited diversification may restrict the range of long-term return opportunities available to savers. Developing greater portfolio diversification (diversifikim) will depend partly on Albania creating deeper capital markets and more high-quality financial instruments.
This concentration also illustrates why risk management does not simply mean avoiding every investment that contains uncertainty. Pension funds normally need an appropriate risk-return balance (ekuilibër rrezik-kthim) because excessively conservative portfolios can produce lower long-term returns. Greater asset allocation (shpërndarje aktivesh) across different instruments can potentially reduce dependence on one issuer or economic sector. Effective diversification (diversifikim) therefore seeks to manage risk intelligently rather than eliminating investment risk altogether.
Albania’s demographic development makes supplementary pensions increasingly relevant. Longer life expectancy creates longevity risk (rrezik jetëgjatësie) because retirement savings and public pension systems must support people for more years after they stop working. Population ageing can also worsen the dependency ratio (raport varësie) between workers contributing to the public system and pensioners receiving benefits. Developing supplementary retirement provision (sigurim pensioni) can help households reduce complete dependence on the state pension during old age.
Labour-market changes create another reason for modernising pension regulation. Workers increasingly experience more fragmented careers (karriera të ndërprera) involving multiple employers, periods abroad or different forms of employment. Pension rights therefore need greater portability (transferueshmëri) if employees are not to lose benefits each time they move. Modern regulation should provide continuity (vazhdimësi) between different stages of an individual’s working life rather than assuming one person will remain with a single employer until retirement.
The World Bank has played an important supporting role in preparing Albania’s pension reforms. Its specialists have provided technical assistance (asistencë) to AFSA in transposing European financial legislation. International expertise can help Albania develop stronger supervisory capacity (kapacitet mbikëqyrës) while regulators adapt European rules to the characteristics of a much smaller domestic market. This institution-building (ndërtim institucional) is especially important because sophisticated legislation is effective only when supervisory authorities possess the staff, data and technology required to enforce it.
AFSA has also emphasised a transition toward more risk-based supervision across Albania’s financial markets. Under such a model, regulators direct greater attention toward institutions or activities presenting greater systemic risk (rrezik sistemik) instead of applying identical scrutiny everywhere. Better digital systems can improve regulatory monitoring (monitorim) by allowing supervisors to analyse financial data more rapidly. Increased supervisory intervention (ndërhyrje mbikëqyrëse) can then occur earlier when indicators suggest that governance or financial conditions are deteriorating.
The September proposal therefore represents more than a technical amendment to pension legislation. It is part of a broader Europeanisation (evropianizim) of Albania’s non-bank financial system. Stronger rules on governance, risk and member information create greater regulatory convergence (konvergjencë) with institutions operating inside the European Union. The longer-term objective (objektiv) is a pension market capable of functioning safely within a more integrated European financial environment.
For individual savers, however, the success of the reform will ultimately be measured in much simpler terms. Members need confidence that their retirement contributions (kontribute) are protected and managed responsibly for decades. They also need sufficient clarity (qartësi) to understand costs, investment performance and the pension income they might eventually receive. Stronger trust (besim) could encourage more Albanians to supplement the public pension system with long-term private savings.
The draft remains under the legislative process, so its final provisions may change before adoption. Public consultation allows companies, specialists and citizens to provide feedback (reagime) on the proposed framework. Parliament will ultimately determine the final legislation (legjislacion) that becomes binding. Until then, the amendments should be understood as an important regulatory blueprint (plan rregullator) for the direction in which Albania intends to develop its private pension system.
If implemented effectively, the reforms could make private pension saving safer, more transparent and easier to retain throughout a worker’s career. European alignment would provide a more sophisticated regulatory architecture (arkitekturë rregullatore) for a market expected to grow as Albania’s economy and population age. Strong supervision will be essential for maintaining long-term confidence (besueshmëri) because pension savings may remain invested for several decades before they are needed. The central challenge (sfidë) will be translating European-standard legislation into practical protection that ordinary Albanian savers can see and trust.
Key Albanian Vocabulary
mbikëqyrje oversight
qeverisje governance
transparencë transparency
përafrim alignment
harmonizim harmonisation
propozim proposal
kompetenca mbikëqyrëse supervisory powers
mangësi deficiencies
parandalues proactive
ndarje përgjegjësish allocation of responsibilities
llogaridhënie accountability
ndarje funksionale segregation
funksion i administrimit të rrezikut risk-management function
rrezik likuiditeti liquidity risk
vlerësim rreziku risk assessment
auditim i brendshëm internal audit
pavarësi independence
shqyrtim scrutiny
kompetencë competence
ekspertizë expertise
profesionalizëm professionalism
të ndara juridikisht segregated
paaftësi paguese insolvency
ndarje mbrojtëse ring-fencing
kapitalizim capitalisation
fonde të veta own funds
rezervë financiare buffer
të drejta të fituara accrued rights
të drejta pensioni entitlements
periudhë për fitimin e të drejtës vesting period
informacion shpjegues disclosure
parashikueshmëri foreseeability
paqartësi ambiguity
performancë performance
terma realë real terms
krahasueshmëri comparability
tarifa charges
deklarim disclosure
transparencë e kostove cost transparency
përfitime benefits
analizë skenarësh scenario analysis
pasqyrë e përfitimeve të pensionit Pension Benefit Statement
orientim në interes të anëtarëve fiduciary orientation
likuiditet liquidity
konflikte interesi conflicts of interest
faktorë mjedisorë, socialë dhe të qeverisjes ESG factors
kritere financiare financial criteria
rreziqe risks
përgjegjësi liability
ruajtje e aktiveve custody
garanci mbrojtëse safeguard
veprimtari ndërkufitare cross-border activity
qasje në treg market access
integrim integration
pëlqim consent
masë mbrojtëse safeguard
pagesa pensioni payments
transferueshmëri portability
lëvizshmëri mobility
rritje increase
zgjerim growth
i përqendruar concentrated
depërtim penetration
mbulim coverage
mbrojtje e konsumatorit consumer protection
përqendrim concentration
stabilitet stability
diversifikim diversification
ekuilibër rrezik-kthim risk-return balance
shpërndarje aktivesh asset allocation
rrezik jetëgjatësie longevity risk
raport varësie dependency ratio
sigurim pensioni provision
karriera të ndërprera fragmented careers
vazhdimësi continuity
asistencë assistance
kapacitet mbikëqyrës supervisory capacity
ndërtim institucional institution-building
rrezik sistemik systemic risk
monitorim monitoring
ndërhyrje mbikëqyrëse supervisory intervention
evropianizim Europeanisation
konvergjencë convergence
objektiv objective
kontribute contributions
qartësi clarity
besim trust
reagime feedback
legjislacion legislation
plan rregullator blueprint
arkitekturë rregullatore regulatory architecture
besueshmëri confidence
sfidë challenge
