Pension Reform in Georgia

Although there is a consensus within the Georgian society that a decent pension should be guaranteed for every citizen, the exact method on how to provide it is a controversial topic.

 

The Friedrich-Ebert-Stiftung South Caucasus organized a roundtable conference in Tbilisi on 7 December 2017 to enhance dialogue about this important reform project. The conference brought together representatives from the government, the Georgian Trade Union Confederation (GTUC), academia and experts on pension policy.

Everyone agreed that the current pension system needs urgent reforms. The public universal basic pension amounts to 180 GEL per month (approx. 60 €), regardless of working years, paid taxes or other factors which define the amount of one’s individual pension in many European states.

Public attitudes toward this system and possible future reforms were presented by Iago Kachkachishvili from the Institute of Social Studies and Analysis. A representative survey conducted among 1000 participants showed that the majority of the surveyed felt the need for reforms and were ready to contribute to their future pension. However, a significant part also stated that they lacked information about the two main reform proposals by the government and the GTUC.

The conference offered the opportunity to have the proposals explained and compared by those directly responsible for them. Nikoloz Gagua, Deputy Minister of Finance, presented the government’s proposal to introduce a funded pension, financed by equal contributions of employer, employee and government of 2% of a worker’s monthly wage. The GTUC seeks to modify this proposal by a different indexation mechanism and additional rights for especially vulnerable workers. Belgian pension expert Martin Hutsebaut proposed an alternative Pay-as-you-go-system, disagreeing with the argument that demographic development in Georgia does not provide the necessary balance between contributors and pensioners.

The importance of social policies, and pensions in particular, for social peace and therefore security in the South Caucasus was emphasized by Franziska Smolnik from the German Institute for International and Security Affairs. This statement was underpinned, by Susanna Karapetyan from ESI Consulting Group in Yerevan, who talked about massive social protests in Armenia, following a pension reform which was perceived as unfair by the country’s middle class.  

There is a lot of disagreement as to whether or not the proposed pension reform will effectively fight poverty in old age, if those with low income will profit by it at all and if there will be any positive impact on inequality. However, the lively debates on this and other questions showed that there is a need for more information and more dialogue around this subject.

Graphic: FES Georgia

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