Armenia’s pension reforms based on world experience – ex-minister

The pension reforms, which the Armenian government recently incorporated into the legislation, are based on the world countries’ experience and adapted to our specific needs, according to a former minister of economy.

Speaking at the Constitutional Court’s hearing devoted to the disputed pension law, Nerses Yeritsyan, who is now the Central Bank’s vice president, said the reforms rely on the world’s best practices.

“This system, introduced in different countries after 2006, was reformed to a certain extent to rule out the Chilean mistakes. Estonia, which served as a basis for Armenia, is considered the best example. The first lesson we have learned from Chile was that there was no minimal buffer after the system’s launch; hence if people could not work for some reason, they did not have a minimal pension at the expense of state resources. In our case, the introduction of the basic pension offers a solution to the problem,” he noted.

The Constitutional Court held its first hearing on the pension law on March 28. It is continuing the debate today.

The amended pension law applies to all the Armenian citizens born on January 1, 1974 and later. It requires them to make contributions to pension funds in the amount of 5% of their monthly wages. The reform met a wide public anger, with many considering it a restriction on an individual’s right to manage his or her incomes independently.

Yeritsyan said Chile’s example was the second mistake that allowed all the employed citizens, including those who retired five years later, accumulate pensions.

“That’s why, based on certain calculations, we have found the optimal age allowing a person to accumulate enough to ensure the remunerable coefficient,” he noted.

Felix Tokhyan, a member of the Constitutional Court, further asked Yeritsyan to give a justification behind the Central Bank’s decision to require the salary deductions from all employers (despite the CC’s January 24 ruling to suspend the mandatory component of the law).

“The Central Bank has not authorized itself to interpret the CC ruling. We just issued a statement under the circumstances to settle matter. We just made a statement which wasn’t binding,” Yeritsyan replied.

Asked whether all possible financial risks have been calculated, the Central Bank vice president admitted that they do not rule out risks. “Yes, there are risks which we did not hide; we have incorporated it into the law, pointing out to the measures we are planning to implement under such circumstances. They have undergone an expert examination. I have to say that the risks are balanced in that they are restricted to only certain price fluctuations which may have an essential impact. It is planned to launch three portfolios with a 25% share balance. A new portfolio cannot be created if there is not an increase or decrease of at least 15% in relation to other portfolios. Shares are fluctuating assets which may create risks. But whatever the case, you will regularly receive the principal sum,” he added.