What is the accumulated pension program Gov’t plans to launch?

Head of Georgia’s Bank Association responded to several changes announced by the Government. Photo by N.Alavidze/Agenda.ge.
Agenda.ge, 31 Oct 2017 - 18:34, Tbilisi,Georgia

The Government of Georgia plans to launch a new type of pension system known as the accumulated pension program starting from the next year.

The Ministry of Economy says that a relevant bill has already been drafted and will be sent to parliament for discussions at the end of this year.

"Changes will come into play allegedly from the third quarter of 2018,” the Ministry reports.

The essence of the accumulated pension is that the state cuts certain amount of money from the employed people’s monthly salaries and puts the sum on their pension accounts.

When the people reach pension age, 65 for males and 60 for females, they will have an opportunity to use the accumulated money together with the state pension, which currently equals 180 GEL ($69).

Deputy Minister of Economy presented the draft for media. Photo by Ministry of Economy press office. 

Details about the accumulated pension

  • People up to 40-years-old and who are employed will be involved in the program, no matter whether they wish it or not.
  • People over 40 will have a choice whether to be involved or not.
  • The pension program covers citizens of Georgia, foreign citizens permanently residing in Georgia or those having no citizenship but are employed or self-employed and having income.
  • The monthly input of an employed person, both in private and public sectors, will equal 2 percent of their untaxed monthly salary.
  • Self-employed people can use the program or not; it is up to them to decide.
  • If a self-employed person decides to accumulate the pension they will have to put 4 percent of their monthly incomes.
  • The state will provide 2 percent of the employed person’s taxed salary on their pension account.
  • The state will invest the money accumulated as pension and the people involved in the program will also enjoy the benefit provided through the investment.
It is very important that the program is both for the public and private sectors. This is a type of sharing of social responsibilities,” Deputy Minister of Economy Nino Javakhadze said.
The state contribution in the process is very high and unprecedented. The state share is 2 percent and the benefit provided through the investment. Withdrawing of money from the account will be free of income tax,” she added.

 The pension reform bill was drafted by the Ministry of Economy together with the Ministry of Finance and the National Bank.

Donors such as the Work Bank, Asian Development Bank, USAID G4G, International Monetary Fund, and the French Development Agency were actively involved in drafting the bill.