The introduction of voluntary pension funds in Montenegro is a significant step towards improving the social security of citizens, particularly the elderly population, said Jelena Međedović, Vice President of the Pensioners’ Association.
Commenting on the recent adoption of the proposal for the Voluntary Pension Fund Law, she emphasized that this initiative has already been recognized in developed European Union countries and the region, aiming to offer citizens additional options for savings and ensuring a safer old age.
Rights and obligations
Međedović highlighted the importance of thoroughly informing citizens about the rights and obligations under this new law, as it introduces an entirely new concept in Montenegrin society.
“Although the idea holds promise, the question remains whether our citizens are financially capable of participating in such projects, given that a significant portion of the population is already living below the poverty line,” said Međedović in an interview with Pobjeda.
Despite the potential positive impact on the capital market and the overall economy, Međedović warns that the success of this project will depend on its adaptation to the country’s real economic conditions.
“This idea has been recognized in other countries and has already yielded some results, confirming the need for proper legal regulation to ensure a positive and productive outcome for all participants. It should contribute positively to the capital market and indirectly to the operations of the real sector and the economy as a whole,” she stated. She added that, given this is a novelty in Montenegro, citizens must be fully informed about all aspects of this idea, which is already well-established in regulated countries.
“For Montenegro, this can be considered a step towards becoming a more organized society,” she noted.
The essence of such investments, or savings, is to provide better social security for citizens, particularly the elderly population.
“This issue requires a broader explanation and understanding from various sectors of society, but it is important that it has now been brought to the forefront. This project will be open to all citizens, regardless of whether they are employed. They will be able to decide the amount, duration, and method of payment and withdrawal. However, not everyone will have access to this, and the number of those excluded could be significant,” said Međedović, adding that it is difficult to gauge how ready society is for this project.
“Primarily, the conditions are mismatched in terms of the ability to contribute. If we consider that one in five citizens of our country is already living in poverty, they are automatically unable to contribute any savings. This applies not only to those with minimum wages but even to those with average salaries. However, those with higher incomes, who are not in poverty and are living well despite high prices and inflation, will benefit from such funds, ensuring a comfortable life in their later years,” she explained.
Međedović emphasized that the divide between the rich and the poor remains, despite declarations of social justice. “This idea will undoubtedly be viewed with pessimism by one-fifth of our society. Our people have a saying: ‘The poor find even God hard to bear,'” she concluded.
Goals of the new law
The government recently announced that the proposed law establishes the foundation for further development and enhancement of the individual capitalized savings system, with a direct impact on improving the future social security of citizens and ensuring permanent and effective social protection to guarantee a decent standard of living in old age.
The goal of this legislation is to improve the business environment, develop voluntary pension funds in Montenegro, and establish an appropriate regulatory and supervisory framework for pension fund management companies in Montenegro, aligned with EU legal standards in this area.
“This should have a positive effect on the capital market, as well as indirectly benefit the real sector and the economy as a whole,” stated the government.
The government explained that pension savings represent periodic payments in cash, which are provided to individuals who have met the prescribed conditions, with payments potentially taking the form of lifetime payments, periodic payments, lump-sum payments, or a combination of these options.
“From a fiscal perspective, in accordance with the existing and proposed laws, pension savings are considered part of the already taxed net income of citizens,” the government concluded.
