What is pension indexation and why we should not confuse it with growth
2024-10-01 08:47:52
TiranaPost
A few weeks ago, the good news was given that pensions would be indexed by 4.1%. Although this indexation increases the pension, it is not actually an increase . It does not mean that pensioners will have some more money to increase welfare.
Indexing is something that in Albania is done with pensions every two to three years, while in the world or in foreign companies operating in Albania it is done every year. Literally, it is mitigation of the effects of price increases due to inflation, so as a kind of compensation for price increases .
The increase in inflation means the increase in money in use, the increase in prices and the decrease in the value of money in relation to goods. So, put with a simple example, due to the increase in inflation with the same amount of money today we buy less goods than 3 years ago. This is exactly what pension indexation aims to correct.
The real price increase has not happened yet! The scheme is expected to be reviewed in mid-October.
