Day: June 18, 2024

Cumulative pensions in Armenia

The cumulative pension system was introduced in Armenia in 2014—initially on a voluntary basis, and since 2018, on a mandatory basis. This year marks 10 years since the mechanism was launched, yet many people are still unaware of the details.

Here’s what future retirees need to know about cumulative funds and the conditions offered.

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Who has accumulated more money in their pension fund

Tatevik A., 35, has been working in the government system for five years. She hadn’t given much thought to the amount accumulated in her pension fund until her colleagues brought it up. She discovered that over her years of work, she had saved around 1 million drams ($2600) in her cumulative pension fund.

“We started comparing the amounts everyone had accumulated in their pension funds and joked about who would have a more secure retirement. It turned out some colleagues had saved more—up to 2 million drams ($5200),” Tatevik shared.

After this conversation with her colleagues, Tatvik even calculated how much she would have by the time she retires at 63 if she continues in the same position with the same salary.

At 63, Armenian citizens who are part of the cumulative pension system will receive an additional amount on top of the state pension. This additional amount comes from what they have accumulated in their pension fund over the years. Each month, 10% of an employee’s salary is saved in the fund—5% directly from their salary and another 5% from the state budget.

How it all began

The need for a cumulative pension system in Armenia was first discussed in the early 2000s. The law on cumulative pensions was passed in December 2010 and came into effect on January 1, 2014, following a set schedule. Initially, anyone interested could participate in the pension savings plan on a voluntary basis.

By 2018, about 200,000 people had voluntarily joined the cumulative pension system, with the total amount in pension funds exceeding 120 billion drams ($312 million at today’s exchange rate).

Starting July 1, 2018, the payment of cumulative social contributions became mandatory for all workers born after January 1, 1974, regardless of their employer’s legal status. This means that contributions to the cumulative fund became obligatory for employees of government institutions, as well as commercial and non-commercial organizations.

The decision to transition to a mandatory cumulative pension system was significantly influenced by the aging population factor.

According to international standards, to ensure the well-being of one retiree, social contributions from at least three workers should be made to the treasury. In Armenia, in the 2000s, one worker supported one retiree, a critically low ratio.

Since 2018, the mandatory participants of the cumulative pension system include:

• Civil servants born after January 1, 1974 (starting from the beginning of the year),
• All workers born after January 1, 1974 (since July 2018),
• Those who started working for the first time after 2014,
• Individual entrepreneurs,
• Notaries.

Who controls the future pensioners’ money and how?

The Central Depository of Armenia is the custodian of the cumulative pension funds and the registry of participants.

Two organizations manage the pension funds: Amundi-Acba Asset Management and C-QUADRAT Ampega Asset Management Armenia. Each manages three types of pension funds:

• Stable Income (Low Risk): Savings are invested in deposits or bonds.
• Conservative (Medium Risk): Savings are invested in deposits or bonds and up to 25% in stocks.
• Balanced (High Risk): 50% of savings are invested in deposits and bonds, and the remaining 50% in stocks.

Future retirees can choose their manager and fund at their discretion. If they do not make a choice, the system automatically assigns them to a medium-risk (conservative) fund managed by one of the companies.

Most did not choose their pension fund independently

Our research indicates that the majority of participants did not make an independent choice regarding their pension fund.

According to the Central Bank, in the first quarter of 2024, there were 845,082 participants in cumulative pension funds. The overwhelming majority—838,286, or over 98.5%—are enrolled in the conservative fund.

This means only 1.5% chose their fund independently. Specifically, 3,635 people preferred the stable income fund (low risk), and 3,161 opted for the balanced fund (high risk).

In response to our inquiry, C-QUADRAT Ampega Asset Management Armenia, which manages pension funds for about 370,000 people, reported:

“About 99% of beneficiaries are concentrated in the conservative fund because they did not make a choice.”

The pension fund management company encourages participants to be more proactive, monitor the performance of managers, and make their own choices:

“Active participation by beneficiaries in managing their pension funds will help in the effective distribution of pension assets among the funds.”

According to data published by the Central Depository, 67% of the amounts entrusted to cumulative funds are invested within Armenia in drams, in the form of government and corporate bonds, deposits, equity securities, and alternative investments. The remaining 33% are invested in dollars and euros in foreign equity and debt securities.

Among the most significant investments contributing to Armenia’s economic growth, C-QUADRAT Ampega Asset Management Armenia highlights the following:

“The funds’ assets are directly or indirectly invested in the real sector of the economy through investments in the ‘EU-Armenia SME Fund’ and bonds issued by the Armenian electrical networks. In 2024, the company invested in the venture fund Formula VC, aimed at developing the IT sector, which is considered a priority for Armenia’s economy.”

Why don’t people take advantage of the choice? Expert opinion

According to economist Narek Karapetyan, an expert from the Amberd Research Center, several factors contribute to why people end up in pension funds by default and remain there:

Lack of awareness

“I believe there needs to be increased public awareness. Citizens generally do not take the initiative. Despite pension fund management companies effectively presenting their activities on their official websites, there remains a need for more accessible information to raise public awareness.”

Lack of clear differences between funds

“If there were significant differences between the managers and the funds, the issue of choice would be very relevant. However, most people do not see major differences between the three funds offered by the two managers and therefore do not change the default choice.”

Limited choice

“In the U.S., the cumulative pension system offers a multitude of plans. One such plan allows individuals to independently form an investment portfolio for their pension savings. U.S. citizens often consult pension asset management advisors for advice on where to invest.

If we provided our citizens with such freedom of choice, I would say they are passive. However, our offering is quite limited—people do not have the authority to manage their assets independently.”

Impact of pension funds on the economy

Currently, the net assets accumulated in Armenia’s pension funds amount to around 878 billion drams (over $2 billion).

Economist Narek Karapetyan believes:

“The funds accumulating in the pension accounts will continue to grow in the coming years until the first generation begins to receive their pension payments. In 10-20 years, the amounts accumulated in these funds could reach 50-60 percent of our GDP, significantly impacting the country’s economy.”

According to the expert, as a result of legal reforms implemented in recent years, pension funds now have mechanisms that influence economic growth and development. However, this impact could be magnified several times with the introduction of new tools and mechanisms.

“With more effective use of pension funds, both the economy and the people will benefit. Citizens’ accumulated funds can be invested in more diverse areas. The economic development dynamics will provide people with better opportunities for skill realization, active economic participation, and income generation,” he says.

When you can receive your pension

Participants in the pension fund can start receiving their pension at age 63, alongside their regular age-related pension.

Before reaching 63, the pension can be accessed under the following conditions:

• At age 55, if sufficient funds have been accumulated (20 million drams, approximately $52,000);
• If the participant is diagnosed with a disease listed in the government-approved list of illnesses;
• If the participant is recognized as having a third-degree disability;
• If the participant is a non-resident working in Armenia who returns to their country of permanent residence.

According to the Central Depository, as of June 1, 2024, 42 Armenian citizens have already taken advantage of their right to receive a pension.

Water pipe accident in Tbilisi

For over two days now, part of the population in the capital city of Georgia and the nearby town of Mtskheta—totaling around 300 thousand people—have been without water due to a major water pipe accident. With temperatures in Tbilisi reaching 35 degrees Celsius and the active tourist season underway, the water shortage is causing significant problems.

On June 18, the deputy mayor of the capital, Irakli Bendeliani, informed journalists that water supply would be fully restored within a week.

“63 thousand subscribers will receive drinking water according to the schedule within a maximum of one week… [repair] works will take a maximum of one week to completely rectify the situation,” said Bendeliani.

On June 16, Georgian Water and Power (GWP), responsible for the city’s water supply, reported damage to one of the central main water pipelines that supply water to central Tbilisi, as well as the outskirts of Gldani district and the town of Mtskheta.

According to GWP, the accident occurred due to the discharge of “bulk material” onto the pipeline, which damaged the pipe. It is not reported who did this and for what purpose.

The accident was so extensive that it took two days to assess the damage and develop an action strategy. Repair works commenced on June 18.

The repair work is further complicated by the fact that the damaged section of the water pipeline is located in a remote and mountainous area.

Additionally, there is a risk of landslides developing, noted by GWP:

“The mass of artificially compacted soil begins to collapse with any manipulation. Therefore, this further complicates the work of people and machinery.“

During the repair period, a water supply schedule has been set for a significant part of Tbilisi: typically three to five hours per day.

Meanwhile, GWP assures that they continuously monitor water quality around the clock, stating it “fully complies with standards and is safe for human health.” However, the company warns that when water supply is restored, the water may initially appear dark due to frequent changes in network pressure.

Azerbaijan condemns France for its dirty propaganda to disrupt peace  AzerNews.Az

Заявление Министерства обороны Азербайджанской Республики

В средствах массовой информации сообщается о подписании между Францией и Арменией контракта о купле-продаже самоходных артиллерийских установок «CAESAR».
Оснащение Францией Армении артиллерийскими установками смертоносного и наступательного назначения и другими видами вооружения, несмотря на предупреждение азербайджанской стороны, является очередным доказательством провокационной деятельности Франции на Южном Кавказе.
Хотя Министерство обороны Франции в своем заявлении в октябре прошлого года уверяло, что поставляемая в Армению военная техника носит оборонительный характер, оснащение Армении смертоносным оружием согласно нынешней военной сделке является очередным проявлением лицемерия руководства Франции.
Режим Макрона, проводящий в регионе Южного Кавказа политику милитаризации и геополитических интриг, препятствует нормализации отношений между Арменией и Азербайджаном, и обеспечению стабильного мира в регионе. Нынешнее руководство Франции, оставшееся в стороне от процесса нормализации и региональных процессов в связи с подобного рода деструктивной и предвзятой политикой, не может простить Азербайджану этого и поэтому продолжает свою подрывную политику.
Армения – государство, совершившее в отношении Азербайджана военную агрессию и оккупацию. Перевооружение Францией, являющейся постоянным членом Совета Безопасности ООН, Армении, имеющей опыт кровавой военной агрессии, и поддержка армянским руководством политики реваншизма – проявление политической безответственности, открывающей путь к новой войне.
Франция, будучи колониальной империей, исторически имела богатый, вызывающий отвращение, опыт разжигания очагов войны и конфликтов в различных частях мира. Процессы, происходящие в Новой Каледонии и других заморских колониальных территориях, эксплуатация коренных народов, разграбление их природных ресурсов, изменение демографического состава этих территорий в результате расистской политики, подавление протестов силой крови и оружия, являются проявлениями истинной сути режима Макрона. Вместо того, чтобы решить подобные укоренившиеся проблемы, являющиеся пережитком позорного колониального наследия, и положить конец неоколониализму, Франция проводит грязную пропагандистскую и дезинформационную кампанию против Азербайджана.
Заявляем, что всю ответственность за обострение ситуации в регионе Южного Кавказа и возникновение нового очага войны будет нести руководство Армении, проводящее реваншистскую политику, и диктатура Макрона.

Заявление Министерства обороны Азербайджанской Республики

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этот ресурс регулярно кормит говном многочисленных читателей и хотя опровержения этого и других фейков с матча Румыния – Украина давно опубликованы, опровержения и извинений не последовало

и да, этот свинарник “ошибается”… pic.twitter.com/abeVT70MCX

— Румынская сотня 🇷🇴🇪🇺 (@latiniano) June 18, 2024

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— Bill Fairclough (aka #JJ & #EdwardBurlington) (@BurlingtonFiles) June 18, 2024