STATE AUDIT OFFICE
- Press Release-
Skopje, 09.04.2025
Reforms to Ensure a Sustainable Pension System and Adequate Care for the Elderly
Budget transfers for pensions reached 690 million euros in 2024, and in 2025, these transfers are expected to exceed this level. The Strategy for Older Persons expired more than five years ago. At the same time, long-term care services are available to less than 1 percent of the elderly population, indicating the need for comprehensive systemic reforms. There is a risk of increasing social exclusion and further pressure on public finances in the coming decades
In accordance with the 2025 Annual Work Program, the State Audit Office conducted a performance audit on the topic of Ageing of the Population. The audit was conducted as part of an international performance audit coordinated by the Supreme Audit Institution of Israel, with the participation of the State Audit Office of the Republic of North Macedonia and the Supreme Audit Institutions of the Republic of Albania, the Czech Republic, the Republic of Lithuania, the Republic of Malta, the Republic of Paraguay, the Republic of Poland, the Republic of Portugal, and the Slovak Republic.
The audit covered the period from 2014 to June 2024 to assess the measures and activities undertaken by the competent institutions in the Republic of North Macedonia regarding the care for older persons aged 65 and above and the sustainability of pension funds, in the context of the country’s accelerated population ageing.
The audit provided reasonable assurance that, although competent institutions have undertaken certain measures and activities, full and adequate care for older persons aged over 65 has not been ensured, nor has effective management and sustainability of the pension system been secured in the context of accelerated ageing of the population.
The measures and activities undertaken by competent institutions are not sufficient to ensure medium- and long-term sustainability, i.e., the necessary systemic measures to mitigate rapid demographic ageing and the increasing pressures on public finances have not been implemented. Although the pension system, structured on three pillars, ensures regular pension disbursements, its de facto sustainability is undermined by unfavourable demographic trends, a low contribution rate, and pension increases not based on growth in wages, employment, and contributions. While pensions are disbursed on time, this is achieved through increasing budget transfers and postponing the necessary structural reforms.
Investment portfolios of the mandatory pension funds are concentrated in domestic government bonds, which limits the return on invested assets due to inflation.
Despite the adoption of several strategic documents, their implementation has not been satisfactory. Following the expiry of the National Strategy for Older Persons in 2020, the state has not adopted a comprehensive strategic document dedicated exclusively to the older population. Services for older persons remain limited; home-based care services are available to less than 1 percent of persons aged 65 and above and are not available in 31 municipalities. A predominant share of care continues to be provided by the informal sector and families.
Demographic projections for our country are negative, as the share of persons aged 65 and above is expected to rise to more than 34% by 2055. The number of persons aged over 80 will increase more than sixfold compared to 2024, while the working-age population is projected to decline by nearly half a million people, which will further intensify pressures on public finances.
As a result of the above, a comprehensive inter-institutional approach is required, with clearly defined timelines, funding, and delineation of responsibilities.
Timely and coordinated structural reforms would help reduce risks and enable the pension and social protection system to adequately respond to the accelerated ageing of the population.
The audit report of the State Audit Office, which provides a detailed analysis of the state of the pension system, demographic trends, and long-term care capacities for persons aged over 65, indicates that the pension system in the Republic of North Macedonia faces serious sustainability challenges, and the care for older persons remains underdeveloped and largely non-functional in the context of rapid demographic ageing.
The first pillar of the pension system, which is organised on a pay-as-you-go (solidarity-based) principle, has been operating with a persistent negative financial balance. Pension expenditures exceed contribution revenues, and the difference is covered through transfers from the State Budget.
During the period from 2014 to 2024, the share of budgetary funds in the total revenues of the Pension and Disability Insurance Fund ranged between 32.6% and 43.6%. In 2024, transfers from the Central Budget amounted to 42.474 million denars (approximately 690.6 million euros). Projections for the end of 2025 indicate a further increase in these transfers, representing a significant fiscal risk to the State Budget.
Pensions are indexed in accordance with the Swiss model, enabling a continuous increase in the average pension over the period 2015–2025. During 2024 and 2025, pensions were increased on several occasions, without a corresponding increase in contributors’ wages or in the number of contributors paying pension contributions. The average pension amount recorded growth throughout the period, reaching approximately 27.143 denars in October 2025; however, this increase was also financed through budget transfers.
The investment portfolios of mandatory pension funds (second pillar) are highly concentrated in government bonds. While this supports stability, it limits inflation hedging and constrains the potential for higher real returns.
Demographic trends are concerning. The average age of the population increased from 32.3 years in 2000 to 41.8 years in 2024. The share of the population aged 65 and above is rising, while the proportion of younger cohorts is declining. The main cause of demographic decline is not only the low birth rate, but also population emigration. In recent years, significant decreases have been observed: in first-grade enrolment compared to the number of births six years earlier, the number of pupils enrolled in primary education is lower by 2.774 students. A more pronounced gap is observed among high school graduates, where the difference amounts to 34.6% (22.585 live births versus 14.771 high school graduates).
According to projections by the State Statistical Office, the share of the population aged 65 and over is expected to increase from 19.1% in 2025 to 32.6% in 2050 and 34.2% in 2055. The number of persons aged 80 and above is projected to rise from approximately 22.000 in 2024 to over 144.000 in 2055, while the working-age population (15–64 years) is expected to decline by around 470.000 persons. In the absence of timely and effective reforms, budget transfers to the first pension pillar could reach 7.4% of GDP by 2057, leading to a significant fiscal burden on the central government budget.
The elderly care system is insufficiently developed. Following the expiration of the National Strategy for the Elderly in 2020, the state has not adopted an active, comprehensive strategic document on the care for persons aged 65 and above for a period of seven years. The National Development Strategy 2024–2044, for the first time, addresses demographic ageing as an existential issue; however, previous strategies in this area have revealed systemic weaknesses, including overly broad objectives, unclear timelines, a lack of financial estimates, and weak coordination mechanisms.
The social protection budget increased by 68.8% between 2019 and 2025; however, this growth has been primarily directed towards cash benefits (the allowance for assistance and care from another person and the social pension). In 2024, over 33.600 persons aged 65 and above received the care allowance, representing 60.2% of all beneficiaries. In practice, this benefit serves as a substitute for a formal long-term care system, primarily through caregivers who are family members of the person in need of care.
The social pension covers 13.230 beneficiaries; however, the benefit amount is twice as low as the minimum pension and does not contribute to poverty reduction. Formal services for older persons remain limited. The home-based assistance and care service covers approximately 3.000 beneficiaries (less than 1% of the 315.000 persons aged 65 and above) and is not available in 31 municipalities across the country. Day-care centers have a capacity of only 200 persons, while residential care facilities for older persons provide 2.378 beds (7 beds per 1.000 inhabitants aged 65 and above).
There are waiting lists and an uneven geographical distribution (predominantly concentrated in the Skopje region), which further indicates insufficient service capacity. According to projections as of 2024, approximately 63.000 persons aged 65 and above require long-term care, while by 2050 this number is expected to increase to 108.000 persons (an increase of 70%). In the absence of a significant expansion of service capacity, the burden will fall on families and the informal care sector.
The Republic of North Macedonia is undergoing one of the fastest demographic ageing processes in Europe. This situation points to the need for urgent systemic reforms, including an increase in the statutory retirement age, adjustment of contribution rates, revision of the pension indexation mechanism, diversification of investments in the second pension pillar, and an expansion of service capacity for older persons.
The State Audit Office issued recommendations to address the identified weaknesses, including strengthening institutional capacities, improving coordination, monitoring, and financial sustainability of the elderly care system to respond to demographic challenges in the coming decades.
Press Contact:
Albiona Mustafa Muhaxhiri +389 72228 203 [email protected]
Mijalche Durgutov +389 70 358 486 [email protected]
Martin Duvnjak +389 75 268 517 [email protected]