Pension funded system to be applied for public sector employees starting July 1 (video)

The Armenian government has approved the package of supplements and amendments to the Law on Funded Pensions and other laws, in conformity with the April 2 ruling of the Constitutional Court which found a number of provisions of the Law on Funded Pensions to be unconstitutional and gave the government and the National Assembly until September 30 to bring the legislation into conformity with the country’s Basic Law.

The package is aimed at preventing reduction in disposable income after the pension funded system enters into effect. Under the package, the system will be applied for the public sector employees starting July 1, 2014. The system will be introduced in the private sector in a three-year period on a voluntary basis. No compulsory pension contributions will be practiced, there will be target social benefits.

“An incentive system will be allied for persons born before January 1, 1974, i.e. if a person decided to voluntarily participate in the funded system the state budget will match the contribution with another 5 percent. Another problem that we offer to solve with this package is that if a person is above 55 and he has accumulated a certain amount of money, he can witch to the voluntary system,” Minister of Labour and Social Affairs of Armenia Artem Asatryan said at a closed-door meeting of the government.

The mandatory payment, entered into force since January 1, 2014, will not be in effect any longer, the law defines social payment to the state budget at 5 percent rate. It is proposed to set the salary threshold at 500 thousand drams, if more, no social payment will be made, i.e. the maximum social payment for everyone will be 25000 drams, depending on salary.

Prime Minister Hovik Abrahamyan noted in this context that the salary of about 200 000 state employees will be increased form July 1, 2014. This fact is also a basis to define target social payment. “The Government makes a very bold move providing 38 billion drams to increase the salaries by July 1. The population, Armenia’s citizens should be aware of this reality,” he said.