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"I'm Against" civic initiative refuses to start negotiations with Prime Minister

Hovik Abrahamyan promises to present an acceptable solution to the pension problem before late July

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Armenia's former premier: The obligatory accumulative pension system is as dangerous as the war

  • by Alexandr Avanesov

  • Friday, January 24, 17:38

The obligatory accumulative pension system is as dangerous as the war or genocide or years long drought, Armenia's former prime minister and at present a member of the parliament from the opposition Armenian National Congress, Hrant Bagratyan, wrote at his Facebook page. 

He said that the Constitutional Court of Armenia will adopt a decision on the reform on 25 January and it will be impossible to correct anything. He said that the government and representatives of the authorities said about Russia's and Estonia's experience in this sphere, later about the experience of Chile. But this does not meet reality. "Dear members of the Constitutional Court, I would like to speak about the terms and "legality" of exporting money from Armenia.  This reform supposes export of 5% (and more) profit of workers for 45 years. Totally, $2,5-3,5 billion  will be exported from the country.  The companies, which were allegedly selected as managing companies, will become billionaires for that period of time. This is a treacherous and corrupted decision. First, there are no such deposits for 45 years in the world (maximal term of the system - 45 years, minimal - 23 years and medium - 34 years. There may be no economic horizon 45 years long, as there is no indexation of inflation for such a long period. The same is regarding 34 and 23 years.  All the countries (the USA, the Great Britain and Russia) which used to make similar reform, have finally changed legislation  and fixed only 10 years as a norm of the obligatory accumulation. This means that a worker is obliged to accumulate for 10 years, though he may go on accumulating if he wants. As a rule, people choose 10 years of their labor biography.

 Even in Chile they have come to such a conclusion", - former premier thinks. 
According to him, if the system is compulsory, it must be controlled by a state fund. "What can be higher than a state? What diversification are they talking about if we have no state?" Bagratyan wonders. 

"Some people abroad say that this 'reform' is good. Why should it be bad if it is a chance to pump out of the country as much as $50mln-100mln a year? When a fee is compulsory, it becomes a tax. In Estonia, Norway or England they give people income tax preferences in exchange. But we are not smart enough for such a thing. If the Constitutional Court fails to stop this, the 'legal' cash export will become inevitable. As a result, we will face a 0.4-0.5% annual drop in our GDP," Bagratyan says.

The voluntary accumulative pension system was introduced in Armenia on Jan 1 2011. The system will become compulsory starting Jan 1 2014. According to the bill, the minimal pension in the country will be equal to the minimum wage, while the basic pension will total 150% of the minimum wage.  The compulsory accumulative pension system will apply to the citizens born after Jan 1 1974 (the citizens below 40). Starting Jan 1 2014, 5% of their salaries will be transferred to their personal accumulative accounts. The government will transfer a similar amount (but no more than 25,000 drams). It is noteworthy that 6.6%-13% and not 5% of the monthly wages will be charged, as the charges will be made from the so-called "brutto-salary." On 15 November the Republican Party boycotted the extraordinary meeting of the Parliament over the issue. Later on 21 November, an action of protest was held in front of the Government against the pension reform. 

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