The government of Georgia has stated that a new pension system of accumulated pensions will come into play from 2018, referring to the cut of 2 percent of peopleís monthly incomes and saving the money on their pension accounts until the designated age.
Govít says new pension system launches next year
By Gvantsa Gabekhadze
Thursday, November 2
NGOs and experts are skeptical to the current bill offered by the government, stating the draft leaves room of misusing the peopleís money and puts more of a burden on the state budget.
The bill prepared by the Ministry of Economics, with the Ministry of Finance and the National Bank, with the support of foreign donors, reads that people up to 40-years-old will be obliged to accumulate pension.
People over 40 will have a choice whether to be involved or not.
The pension program covers citizens of Georgia, foreign citizens permanently residing in Georgia or those having no citizenship but who are employed or self-employed with an income.
The monthly input of an employed person, both in the private and public sectors, will equal 2 percent of their untaxed monthly salary.
Self-employed people have freedom to decide whether they would like to use the program or not.
If a self-employed person decides to accumulate the pension they will have to put 4 percent of their monthly incomes.
The state will provide 2 percent of the employed personís taxed salary on their pension account.
The state will invest the money accumulated as pension and the people involved in the program will also enjoy the benefit provided through the investment.
When the people reach pension age, 65 for males and 60 for females, they will have an opportunity to use the accumulated money together with the state pension, which currently equals 180 GEL.
ďThe state contribution in the process is very high and unprecedented. The state share is 2 percent and the benefit provided through the investment. Withdrawing of money from the account will be free of income tax,Ē Deputy Economy Minister Nino Javakhadze says.
One part of the experts says that there is a risk for the government to misuse the money on the accounts.
They also claim that providing the 2 percent of the taxed income by the government will be an additional burden for the state budget.
There are some analysts who believe that the government should decrease the income tax it cuts from the salaries from 20 percent to 18 percent and enable the people to use the 2 percent for the pension or other purposes.
Analysts also say that in the situation when the biggest number of Georgian citizens are unemployed it will be better for the government to think about development of economic and boosting incomes, rather than on the pension reform.