Accumulated Pension System Comes into Play

The accumulated pension system, which causes controversies in the public and experts, has come into play on January 1, 2019.

The new model approved by Parliament last year refers to the cut of 2 percent of people’s monthly incomes and saving the money on their pension accounts until the designated age.

NGOs and experts are skeptical to the law initiated by the government, stating the law leaves room for misusing people’s money and puts more of a burden on the state budget.

The law pushed forward by the Ministry of Economics, with the Ministry of Finance and the National Bank, with the support of foreign donors, reads that people up to 40-years-old will be obliged to accumulate pension.

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 who are employed or self-employed with an income.

The monthly input of an employed person, both in the private and public sectors, will equal 2 percent of their untaxed monthly salary.

Self-employed people have the freedom to decide whether they would like to use the program or not.

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.

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 200 GEL.

“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,” Deputy Economy Minister Nino Javakhadze says.

Several experts have stated that there is a risk that the government will misuse the money on the accounts.

Analysts also say that in the situation when the biggest number of Georgian citizens are unemployed it will be better for the government to think about the development of economic and boosting incomes, rather than on the pension reform.