Issue 6, 2017. December-January



The Georgian economy ministry presented the government's plans to change the country's pension system on 31 October. The new plan calls for creating a pension fund and establishing a second type of pension, known as an accumulated pension.

The Georgian government is preparing to overhaul the country's pension system to create a model that will encourage people to save more for their retirement.

The new system, known as an accumulated pension, will exist in parallel to the current, government-provided pension.

"The draft law involves a defined contribution pension scheme, in particular - each employee, employer and the pension scheme agency makes a contribution of 2 percent 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 percent of their income, and the state will additionally transfer 2 percent of taxable income in favor of employed and self-employed people," explained Deputy Economy Minister Nino Javakhadze.

She stressed that pension contributions will be tax free.

"I believe that the contribution of the state is very important in this process: in addition to the 2 percent 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," Javakhadze said.

"That is, the contribution of the state is of two kinds - 2 percent 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," she added. The Ministry plans to send a draft of the bill to parliament by the end of the year; it is estimated that the new system will be launched from the third quarter of 2018. The Georgian government has been working on the new pension program for several years; several donor organizations have been involved in the process - World Bank, Asian Development Bank, USAID G4G, International Monetary Fund, French Development Agency (AFD).

Highlights from the proposal (taken from

- Employed individuals up to the age of 40 will be automatically enrolled in the program.
- People over the age of 40 can opt into the program if they want.
- The pension program covers citizens of Georgia, foreign citizens permanently residing in Georgia or those having no citizenship but are employed or self-employed and having income.
- The monthly input of an employed person, both in private and public sectors, will equal two percent of their untaxed monthly salary.
- Self-employed people can use the program or not; it is up to them to decide.
- If a self-employed person decides to accumulate the pension, they will have to contribute four percent of their monthly incomes.
- The state will contribute two percent of the employed person's taxed salary to their pension account.
- Pension contributions will be accumulated in a pension fund, which will be invested by the state; earnings on the investments will be paid to those who hold pension accounts.