- Brief overview of the types of pension provision
-
Structure of private pension provision
- What are the main types of pension provision?
- Is pension provision mandatory?
- Any restrictions in relation to who can establish a plan?
- Are there restrictions on who can operate a plan?
- Is there a mandatory level of contributions?
- Are there any funding requirements?
- Who bears the costs of private pension provision?
- Tax regime
- Regulatory framework
- Legislative framework
jurisdiction
Brief overview of the types of pension provision
Montenegro has a two-pillar system. The first pillar is mandatory pension and disability insurance, which is provided by the Pension and Disability Insurance Fund of Montenegro. The second pillar is voluntary pension insurance.
Structure of private pension provision
1. What are the main types of pension provision?
Private pensions are provided by private pension funds managed by companies established for the management of voluntary pension funds (“management companies”). Private pension funds may also be managed by companies licensed to manage undertakings for collective investment in transferable securities (UCITS) funds. Benefits are provided on a defined contribution basis.
2. Is pension provision mandatory?
No.
3. Any restrictions in relation to who can establish a plan?
No.
4. Are there restrictions on who can operate a plan?
A pension plan can only be operated by a management company holding a licence from the Capital Market Authority of Montenegro (the “CMA”) to perform this type of activity.
5. Is there a mandatory level of contributions?
No. The amounts of contributions are specified in the membership agreements.
6. Are there any funding requirements?
Management companies must be established as joint stock companies (which cannot issue preference shares) with a minimum share capital of EUR 250,000.
7. What age are benefits taken?
The minimum age at which benefits can be taken is 50.
8. Who bears the costs of private pension provision?
The costs of private pension provision are generally borne by members. However, employers may also cover the costs of voluntary pension insurance for the benefit of their employees.
Tax regime
9. Any registration requirements for tax purposes?
No special registration is required for members of a pension fund. Management companies must register with the tax authority and obtain a tax identification number, as is the case for any other company.
10. Is tax paid on contributions?
No.
11. Are investment returns taxed?
No.
12. Are benefits taxed?
No. Benefits under both the first and second pillars are explicitly exempt from taxation pursuant to the Law on Personal Income Tax.
13. Other incentives to contribute to plans?
No.
14. Limits on benefits or contributions?
No.
Regulatory framework
15. Who is the regulator and what are its powers?
The CMA supervises the establishment and operation of management companies.
The CMA may, without limitation, review regulations, business books, documents and other materials of management companies, pension funds and custody banks. In addition, the CMA can issue warnings, require specified irregularities to be remedied within a set period, withdraw consents regarding the appointment of directors of management companies, and revoke licences granted to management companies, etc.
16. How does it receive information?
Management companies are obliged to provide the CMA with reports and information as prescribed by law. The CMA may also collect any required information directly by accessing the relevant documents at the premises of management companies.
17. Any supervision of failed or insolvent schemes?
The CMA supervises the investments made by pension funds. The members of the pension fund bear the investment risk.
Legislative framework
18. Requirements in relation to discrimination?
Management companies operating open pension funds may not reject an application for membership from any person. However, management companies operating closed pension funds may accept applications for membership only from persons employed by the employers, members of trade unions, or other organisations for whose needs the specific closed pension fund has been established.
19. Rights for early leavers?
A member of a voluntary pension fund may leave by withdrawing funds from their account, minus the fees charged by the management company, upon reaching the age of 50.
20. Union involvement?
N/A
21. Codetermination involvement?
N/A
22. Scope for cross-border activity?
Members of pension funds may be foreign nationals. However, management companies must be domestic legal entities. That said, shareholders of management companies may be foreign nationals or entities.
23. Are there restrictions on switching plans?
No.
