Issue 5, 2017. October-November

   

DYNAMISM AMONG THE YOUNG WITH RETIREMENT PLANNING IN GEORGIA

Mariam Sikharulidze and Dustin Gilbreath

The pension system in Georgia is facing challenges. According to the World Bank, in a country with a declining working-age population, a retirement system in which the state is solely responsible for providing pensions-as in Georgia-is inadvisable. Yet, the findings of a March 2016 Caucasus Research Resource Center/National Democratic Institute (CRRC/NDI) survey suggest that young people have a greater diversity of plans for retirement than simply relying on state pensions. This dynamism among the young has the potential to ease the financial burden on society of providing pensions for the elderly in the medium-to-long term.

The government of Georgia, with the help of international organizations, has been working to reform the country's pension system, with the latest pension reform plan approved in spring 2016. The government is set to launch the new system in 2018. With the new plan, in addition to the basic "universal" pension still provided by the government, each employee, his/her employer, and the government will each make contributions to the respective employee's retirement savings account. Each of the contributors will pay at least 2% of each employee's monthly salary, totaling a minimum of 6% of a given employee's salary in a given month. Hence, an individual's retirement savings will consist of, at a minimum, these contributions and the interest accumulated on the retirement account.


According to the March 2016 CRRC/NDI survey, a plurality of the population of Georgia plans to or is supporting themselves in their old age with state pensions (49%) and/or assistance from their children (31%). Roughly a quarter (27%) of respondents reported that they have done nothing, have never thought about it, or don't know what they are doing or plan to do to support themselves in old age.

One should note that a show card was used for this question. Up to three answer options were accepted per interview. Answer options "Saved or plan to save money in the bank" and "Rely or plan to rely on support from my relatives (besides my children)" were named very rarely and are thus combined with the answer option "Other."

Younger people, however, more frequently plan to rely on sources of income other than state pensions than older people do. A majority of the population 56 years old and older (72%) name government pensions as a means to support themselves in old age. In contrast, only 29% of young people between 18 and 35 years old report planning to rely on government pensions when they get old.

One should nopte that answer options "Made or plan to make investments, "Saved or plan to save money, but not in the bank," "Saved or plan to save money in the bank," and "Bought or plan to buy a house/apartment for rent or sale," were combined with the answer option "Other."

In terms of geography, people living in rural areas most often report they plan to rely on the state pension (55%), followed by those living in urban areas (47%), ethnic minority settlements (47%), and the capital (42%). Although "support from children" is the second most frequently cited source of financial assistance in Georgia, people living in the capital and other urban settlements express more willingness to earn independently in their old age and cite other income sources, such as working when old, buying a house/apartment for rent or sale, or making other investments, more frequently than in rural areas. This might indicate a lack of earning opportunities for the elderly in rural areas and highlights the socioeconomic gap between different settlements.


The diversity of retirement plans among younger respondents is driven in large part by those in Tbilisi: a full two thirds of 18- to 35-year-olds in Tbilisi report that they plan to rely on sources of income in retirement besides their state pensions or their children. Young people in Tbilisi are also more likely to report that they will work when older. In contrast to only 21% of young Tbilisians, 51% of young people in rural areas have never thought about their retirement, have done nothing to prepare for it, or don't know what they will do to support themselves in their old age.

There is clearly a diversity of retirement planning in Georgia, and particularly in different age groups. The government should encourage this diversity, particularly among young people, as it has the potential to reduce dependence on state pensions and place less pressure on the state in the long term. Awareness-raising campaigns about such options are also important for supporting citizens in making informed decisions, and could be integrated into the campaigns already planned before the launch of the new pension system.

Mariam Sikharulidze was the Public Relations Manager at CRRC-Georgia until September 2017, and is currently a graduate student at University College London.

Dustin Gilbreath is a Policy Analyst at CRRC-Georgia.

The data presented in this article is available at CRRC's Online Data Analysis (ODA) tool: http://caucasusbarometer.org/en/.

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