Armenia’s Government to Cover 7.5% of Funded Pension Plans Mandatory Component

Armenia’s Government on Monday approved a draft amendment to the law “On Funded Pensions,” stipulating that the mandatory funded pension component would come into force on July 1, 2018.

Meanwhile, according to bill, “the citizens’ 10% contributions to the mandatory funded pension system will be formed in the proportion of 2.5 to 7.5%, i.e. 2.5% shall be contributed by the citizen, and 7.5% – by the State. Note that under the currently applicable system, the State and the beneficiaries are making equal contributions – 5% each,” a statement by the Prime Minister’s press service said following the Monday extraordinary Cabinet meeting.

Recall, at a Parliament session late last week, Prime Minister Nikol Pashinyan had suggested that one of the main challenges of the newly-appointed Cabinet of Ministers was the adoption of a decision on the mandatory component of the mandatory funded pension plans. “The issue has major political implications. The government must make serious decisions in this regard. Of course, the solution should arise from the national interests of Armenia. I want to emphasize a few facts that can not be ignored in making the decision. Fact 1: 80% of workers are already included in the system, and only 20% will be included after July 1. Fact 2: presently, 120 billion drams have been collected in the accumulation funds, 70% of which are invested in the Armenian economy. Fact 3: the management of these pension funds is carried out by internationally-respected major companies, and their further fate in Armenia will be an international assessment of the degree of trustworthiness of investments in our country.

“The most reliable specialists in the sphere say that this process has transgressed the point of no return. And when making a decision on this issue, we must take into account not only the long-term, but also the short-term risks that can have huge consequences for the Armenian economy,” Pashinyan had stated, adding that “the public distrust towards the mandatory funded pension plans was derived from the distrust towards the former government, which has now become a non-issue.”