22 Jul 2018 - 12:08
The parliament of Georgia approved a law on an accumulative pension system yesterday, which is part of a larger pension reform initiated by the Georgian government.
The government plans to launch a supplementary programme alongside the currently existing universal basic pension which amounts to 180 Gel.
The new programme, the launch of which is planned for the end of the year, will be mandatory for legally employed people under 40, meaning they will be enrolled automatically, and voluntary for people above 40 as well as for self-employed citizens.
The system will work with 2+2+2 scheme. This means that employees will pay two per cent of their salaries towards their pension, while employers and the government will add another two per cent each.
"The government will help the Georgian people save for retirement. The reform also has an important economic effect. It will significantly increase savings in the economy and in doing so create alternative source of financing for the development of the capital market. Georgian business will have access to long-term financing in local currency to make investments, create jobs and support economic growth,” Deputy Minister of Economy Ekaterine Mikabadze said yesterday in parliament.
The government says the introduction of the supplementary pension programme is extremely important since the existing system has several shortcomings in terms of fairness, effectiveness and fiscal sustainability. Indeed, a number of NGOs and economists argue that the Georgian economy is not ready for such a pension system considering the GDP growth rate and low salaries.