The role of pension funds in economic development - Study case Rep. of Kosovo

AuthorSherif Gashi
PositionGlobus College - Kosovo
Pages97-108
97
Balkan Journal of Interdisciplinary Research
IIPCCL Publishing, Graz-Austria
ISSN 2410-759X
Acces online at www.iipccl.org
Vol. 6 No.1
May, 2020
The role of pension funds in economic development - Study case Rep. of
Kosovo
Dr. Sherif Gashi
Globus College - Kosovo
Abstract
The aim of the study is to explore the role of pension schemes in economic development.
The research is focused on the second pillar of the pensions system. Pension
savings can lead to the deeper and more e cient capital markets. Pension savings
directly increase the funds in the capital markets, available for private investments.
Furthermore, the deeper capital markets can lead to be er capital distribution, thus
improving overall e ciency and economic growth. Higher pension savings could
a ect the f‌i nancial landscape, increasing the weight of institutional investors such
as pension funds and life insurance companies. Given the long maturity of these
institutional investors' liabilities, they can a ord to make long-term investments, for
example through long-term equity shares. In general, pension funds and insurance
companies have been found to behave like long-term investors.
Kosovo has an unique pension system in Europe, such a system has been developed
by Latin American countries, especially Chile. The Kosovo pension system is based
on the second pillar DC (def‌i ned contributions), which function is under the name
KPST (Kosovo Pension Savings Trust). KPST is quite powerful in Kosovo f‌i nancial
system, second a er commercial banks, having as a criterion the assets at its disposal.
KPST has a major role in the local economy by orienting a huge part of its assets in
treasury bonds or bank deposits.
Keywords: pension fund, pension contributions, Kosovo, management, economic
growth.
Introduction
Developed and developing countries are facing di culties to cover the enormous
costs of social security and in particular pension insurance.Most of the countries
have large def‌i cit in pension schemes. The main risk, in the developed countries,
that embarrasses the pension funds is demographic risk. Increasing life expectancy,
fertility reducing, reduction of the ratio between worker and pensioner, the decrease
of the number of able - bodied persons, rapidly increasing of the category of retiring
persons, has led many countries to think about new management modules for this
sector.
For a f‌i nancial sustainability and for a be er life for the category of people retiring,
almost all countries, whether developed or developing, began to reform their pension
systems.Developed countries mainly relied on short-term reforms or small reforms
such as: increasing the retirement time, increasing the contribution rate, raising
the awareness of the population to be oriented towards volunteer work, etc.The
developing countries focused on capital reforms by moving from a def‌i ned benef‌i t
system (DB) to a def‌i ned contribution system (DC).Nowadays, reform is focusing on

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