David Stepanyan, Yerevan. Exclusively to Vestnik Kavkaza
Since January 1st, 2011, the Armenian government started realization of the pension reform by implementation of the free-will accumulative pension system which will replace the obligatory accumulative pension system on January 1st, 2014. The participants of the reform are all citizens who were born after January 1st, 1974.
According to the authorities, the accumulative component will enable a future pensioner to form a volume of the future pension individually. The accumulative pension system will be available for all employees younger than 40, freelancers and farmers since 2014. Employees will turn to their debit account 5% of salary; another 5%, but no more than $60, will be turned by the state.
According to the head of the parliamentary committee on social affairs, Akop Akopyan, the current pension system of Armenia is unfair as it is based on estimation of employment history, while the accumulative pension system will enable to give pension on the grounds of paid taxes. He predicts that participants of the new pension system will get pension in an amount of 40% of an average salary. The state will guarantee profitability of accumulated resources in an amount of annual inflation.
Despite such bright prospects, the Armenian society and future pensioners met the rational proposal by the government negatively. They think that the main problem is providing guarantees of pension contribution. This question became a subject for debates in the parliament of the republic and in the society. The government tries to justify guarantees and states that the reform is aimed at a painless shift to the new system. The opposition PMs want to prove that risks are so huge that it would be better to stop the reform which might beggar the country and future pensioners.
Parliament members from the opposition fractions of the Armenian National Congress, parties Heritage and Dashnaktsutyun belive that the accumulative pension system will encourage prosperity of banks only, rather than a real economic growth, especially in the context of the economic crisis. According to them, the required changes will make employers abstain from establishing new working places, as any new working place requires certain obligatory payments to the pension fund.
These aspects lead to a big question – who will control pension resources and where are guarantees that people who make contributions will get money many years from now? The government decided that deposit pension accounts can be controlled by banks operating in Armenia, investment companies and the national mail operator, which answer requirements of the law on funded pension. But why should people trust their money to commerce banks which got green light from the government? As everybody knows well who owns the majority of these banks, there is no doubt that the government thinks about another source of getting profit.
It is doubtful that the accumulated incomes will be put in requisition in Armenia. Most probably, they will appear at foreign markets, while any pension reform can be successful only in case of an internal stable economic growth and guarantees. Meanwhile, the Armenian governmental initiative was welcomed abroad. USAID gave optimistic appraisals to the reform and promised to support the Armenian government in its implementation.
The authorities immediately stated that implementation of the obligatory accumulated pension system would encourage development of the securities market and the pension fund’s resources would be invested into securities. The deputy minister of finances believes that the new pension system helped many countries to overcome stagnation at the securities market. However, these statements sound unconvincingly, considering the criminal-oligarchic model of economic management in Armenia.
Therefore, the government is enthusiastic about implementation of the reform, notwithstanding its reasonability and social opinion. The question whether Armenian citizens will have promised socially prominent old age remains answerless as only the authorities live in prosperity in Armenia. Pensioners survive due to money transferred from happier relatives living abroad or due to mumping on the streets. In this context it is difficult to believe that the government will provide future pensioners with any guarantees.
