State Pension Fund to be Transferred to Foreign Private Company

The government wants to  move to a retirement saving system  in 2017 while  the final version of the reform will be developed  by the end of the year.

According to Otar Dzidzikashvili, head of the  Pension Reform Service, a special group is working to balance the inflationary risks. Experts also have doubts on this subject, which provided information about the pension reform.

Along with the pension fund’s intensive work,  the work is underway on enactment of  the capital market new instruments, as the company should  turn the accumulated funds into  a source of income and carry out  investment that is impossible at this stage  without establishing a new instrument. Otar Dzidzikashvili informs that  various versions are being discussed -what other tools can be created except for  banking deposits, government and corporate bonds.

Otar Dzidzikashvili does not specify what  models will be considered by the  group.

As for the pension fund manager, Dzidzikashvili notes that  it will be a foreign private company having an experience in similar fund management. At this stage, the negotiations have not launched yet with  any company because the details of the reform are still being developed.

There has not yet been determined what percentage of the employee’s salary could be transferred  to the pension fund, but the working group believes that the monthly amount  should not be  less than 6% of a wage in which the state and the employer will  equally contribute their  share. In this case, if 2% of the salary is transferred by the pension owner, an employer and the state will have to pay  additional 2% -2%. As a result, 6% of the beneficiary’s salary will be transferred to the pension fund monthly.

Georgia currently has no retirement saving system. The state pays pensioners a pension in the amount of  GEL 150.

Accumulative pension reform has been under development for several months. The World Bank (WB), Asian Development Bank (ADB), the Ministry of Economy are involved in the work. The Interagency Commission  was set up with the participation of  the Ministry of Finance, the Ministry of Health, the National Bank, etc.