Economy Minister:
Georgia’s pension reform will benefit the elderly and economy

Georgia is about to embark on a major reform of its state pension system.

The reform will see Georgia’s pensioners receive money based on a model of private pension accumulation instead of the existing social pension package.

The new pension system, which has already been approved by Government, will launch next year in Georgia.

Today the country’s Economy Minister Dimitry Kumsishvili participated in public discussions on the topic Pension Reform in Georgia. Representatives from the World Bank Group, USAID and the authorities from the United Kingdom’s pension scheme attended the discussion.

Kumsishvili named the pension reform one of the country’s "major structural reforms”. He stressed the pension system needs to be overhauled and this reform was supported by international financial institutions.

As the pension risks rise over time and the state has to give a pension to more and more citizens, the Government decided to create a mechanism that would help people plan their retirement better so they are not only dependent on state assistance,” said Kumsishvili.

The Minister added it was very important to be aware of all the mistakes other countries had made while implementing similar pension reforms in their own countries so Georgia could avoid making the same mistakes.

The pension reform included two components: 

• Indexation of the existing social pension system; and
• Launch of private pension accumulation.

Specifically, indexation of the existing social pension system meant to create a mechanism that could determine how much the pension should be increased annually. This method will allow the state to protect pensioners from inflation so his/her solvency rate did not worsen.

Kumsishvili said it was important the social pension increased in line with inflation.

Meanwhile the Minister said the private pension accumulation scheme was designed for future pensioners. In this regard money will be deducted from the salaries of the working population and saved in a special account until they reach the pension age. Ultimately these people will have an amount of money at their disposal when they retired.

Kumsishvili said this reform aimed allow more young people to have the ability to save money and provide for themselves in their old age.

Kumsishvili promised the state would encourage pension savings by contributing to their saving. For example if a citizen saved two percent of their income in the special pension account, the state will also contribute an additional two percent as well.

All employed people will be able to save a certain amount of money which will be invested in the economy,” Kumsishvili said.

Furthermore he explained by saving for a pension, it was possible to create long-term resources of the Georgian national currency, which could help develop the country’s capital market.