On 30 September 2026, Montenegro’s leading business portal Bankar.me reported that the abolition of specific pension contributions will render future pensions inequitable, according to policy analysts. The measure, embedded in recent amendments to the Law on Pension and Disability Insurance, eliminates employer obligations for certain social security levies effective 1 January 2027. The government argues the move reduces labor costs and stimulates hiring, but critics warn it severs the contributory link between payments and benefits, undermining the Bismarckian principle of the pension system. The Pension and Disability Insurance Fund projects a revenue shortfall of €120 million annually, requiring direct budget transfers to maintain payout levels. Trade unions have announced protests, citing increased poverty risk for low-income retirees.
Key Takeaways
- Contributory Link Broken: The removal of the 5.5% employer contribution for the solidarity pillar decouples benefit entitlements from lifetime contributions, shifting the system toward a universal flat-rate model that disadvantages high-contribution workers.
- Fiscal Gap Widens: The Fund’s actuarial balance deteriorates, with the replacement rate for average earners projected to fall from 38% to 32% by 2035 unless general taxation covers the deficit, increasing pressure on VAT and personal income tax rates.
- Compliance Burden Shifts: Employers must update payroll software by December 2026 to reflect new contribution codes, while accountants face revised reporting forms (PP-1, PP-2) issued by the Tax Administration, raising short-term administrative costs for SMEs.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement