Presentation of Draft Law of Georgia on Pension Savings
Presentation of the Draft Law of Georgia on Pension Savings was held for media representatives today. Deputy Minister of Economy and Sustainable Development, Nino Javakhadze as well as the Deputy Minister of Finance, Nikoloz Gagua and the Vice-Governor of the National Bank, Archil Mestvirishvili introduced the draft law to the journalists.
Reform on implementation of the Pension Savings System applies to the citizens of Georgia or foreign citizens living in Georgia or stateless persons who are employed or self-employed and receive income from this employment or self-employment. Implementation of pension reform will start simultaneously in both public as well as private sectors.
Nino Javakhadze discussed in details the important aspects of the Reform on Implementation of the Pension Savings System in front of the media representatives: “The draft law involves defined contribution pension scheme, in particular - each employee, employer and the pension scheme beneficiary makes a contribution of 2% of gross volume of the employee’s income to an individual retirement account. As for the self-employed - they will make a deposit of 4% of their income, and the state will additionally transfer 2% of taxable income in favor of employed and self-employed people.”
As the Deputy Minister of Economy and Sustainable Development noted, it is important that this reform will be introduced in both public and private sectors. This represents the distribution of social responsibility between the private sector and the state. “I believe that the contribution of the state is very important in this process, except for a 2% contribution from the state, which will be implemented in favor of participants, the contribution, the accrued interest and the pension withdrawal will be exempt from income tax. This is a big advantage of what the state is doing to encourage people to participate in this system. That is, the contribution of the state is of two kinds - 2% and the benefits that the participants are offered. This is a pretty good offer by the state and it is hardly ever found in other countries of the world,” - Nino Javakhadze stated.
In addition, accumulated amount of the pension will be accrued the investment income. Consequently, a citizen involved in the system will already have some savings that will improve the level of social security at the pension age along with guaranteed pension provided by the State.
Involvement in the Pension Savings Reform will be obligatory for the people bellow 40. However, people of 40 and older would be able to participate in the reform on a voluntary basis. For the self-employed citizens the involvement in the reform implantation is volunteer regardless the age.
As mentioned at the press conference, pension assets will be invested in accordance with the internationally recognized standards in compliance with the investment policy developed by the Investment Board consisting of highly qualified and experienced members.
It should be noted that the draft law on Pension Savings does not envisages the annulment of the current pension system.
Pension reform, which means creation of Pension Savings System, was prepared by the Ministry of Economy and Sustainable Development of Georgia in cooperation with the Ministry of Finance and the National Bank. Work on the draft law was carried out with active involvement of donor organizations (World Bank, Asian Development Bank, USAID G4G, International Monetary Fund, French Development Agency (AFD)), which confirmed their support to the Georgian Government in the Reform on implementation of the Pension Savings System through their contribution in the process.
The draft law will be submitted to the Parliament of Georgia by the end of 2017. Enrollment for contributions as well as enforcement of the Pension Savings scheme is scheduled to be launched from the 3rd quarter of 2018.