In 2011 Armenia shifted to the voluntary
accumulation pension system, which actually does not work. In 2014 the system
of accumulative pensions will become obligatory for RA citizens under 40. Will
impact of the pension reform be positive or not? Opinions on this question
differ.

Currently, the National Assembly discusses a legal package on
pension reforms, which was submitted by the government. The package passed its
first reading in June, and will be discussed at the second reading in a month.

The government ensures that the new system of obligatory
accumulation of pensions will foster economic development, increase savings and
guarantee a decent aging for RA citizens.

Some politicians and experts, however, believe that Armenia
is not ready to shift to the new system.

What is
the substance of the pension reforms?

In
Armenia now a distributive pension system, based on the principle of “social
accord”, is in force. It means that employers make obligatory social security
payment out of salaries to the state budget, which then becomes distributed
among pensioners. 

According
to official data, today about 460.000 working citizens of RA pay social taxes
which become a pension's fund for 520.000 pensioners. By 1 July, 2012 the
average pension rate was about 29.000 AMD.

The
new system of obligatory accumulation requires that working citizens under 40,
i.e. those born after 1 January 1974, accumulate their pensions, through
monthly transfer of 5 percent of their' salaries' pension fund to their
individual accumulative bank accounts.

“The
same amount will be paid by the government, which means that each month 10% of
the salary of a citizens will be accumulated. However, the biggest amount that
the government will pay is 25.000 AMD. It means, that if the 5 percent of
somebody's salary is more than 25.000 Drams, then the person shall feel the gap
to bring it to the obligatory 10 percent,” clarifies Artak Ghazaryan, director
of The Centre of pension system awareness.

The
new law suggests that the pension savings be invested in stocks, shares, bonds,
and bank deposits, and its interest income will be also accumulated at
individual pension accounts. This implies that a person, when becoming a
pensioner, shall receive more money than he/she factually accumulated during
his/her active work time.

According
to Law on Accumulative Pensions, adopted in January 2010, the obligatory
accumulative component will start operating in 2014. Pensions of those who are
over 40 years, will be still calculated on the current scheme: the principal
pension (10.500 AMD) plus compensation for each year of work experience (450
Dram per year), also taking into account the duration of work experience,
whether it is more or less 25 years.

Some parliamentarians are against this new system

Ara
Nranyan, economist and deputy of the Dashnaktsutyun faction, have mentioned in
his numerous public speeches, that the new system is a copy of the system used
in Chili, which now stopped using it because of its failure. He is convinced,
that in 25-30 years Armenia will feel the negative impact of the new system, if
adopted.

The
opposition deputies declared at the four- day parliamentary session that the
legislative package does not include clear guarantees for pensioners, including
return of accumulated amounts in case the pension fund becomes bankrupt or
compensation in case of inflation, etc. In their opinion, the legal reforms aim
just at collecting lots of money at once.

Hrant
Bagratyan, deputy of Armenian National Congress (ANC) faction, states that the
accumulative pension system is “anachronism” and only gives “a green light” to
banks. “The introduction of this system cannot provide economic development”,
he thinks. Hrant Bgratyan, on behalf of ANC faction, proposed that the RA
Government annuls the adopted in 2010-2011 pieces of pension reforms. 

“The
newly developed accumulative pension system is not able to solve current
problems in the system. Also, there are no guarantees that the invested sums
will be directed at the economic growth,” declared Artsvik Minasyan, member of
Dashnaktsutyun faction, and suggested that the Government postpone the package's
discussion.

The Constitutional Court
accepted the opinion of the Human Rights Defender

Although many points of the Law on State Pensions stay
unclear, the RA Constitutional Court give its legal opinion on one of
them. 

Citizens of Armenia, living abroad will no longer be obliged
to travel to Armenia, at least once a year, and submit letters of authority,
signed by notaries in Armenia, to prove that a person to receive his/her
pension, is alive. They also are no longer obliged to go in person to a bank
to  declare that there are alive. Now it
will be sufficient to have a letter of authority, provided by a notary of a
foreign state.

This is the opinion of the Constitutional Court in respect to
the Article 35.6 of the Law on State Pensions. This provision was challenged by
the RA Human Rights Defender Karen Andreasyan who requested the Constitutional
Court to consider the provision anti-constitutional. He expressed a hope that
the Constitutional Court's decision will prevent unlawful implementation of the
mentioned provision.

The
legal package on the pension reform will probably raise hot discussion at the
second reading, too. The coalitions' political forces, eventually, will vote
for the draft submitted by the 
Government. The demonstration of its impact can be seen only in the
future.