Pension System in South Caucasus: Challenges and Reform Options

Verulava, Tengiz (2017) Pension System in South Caucasus: Challenges and Reform Options. In: III International Scientific Conference Politics Around the Caucasus, October 21, 2017, Ivane Javakhishvili Tbilisi State University.

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Worldwide discussion on the sustainability of pension systems remains a core agenda of debate. Factors such as aging, rising longevity, declining fertility rate, reducing the active population, labor migration caused financial difficulties in Southern Caucasian (SC) countries. A 1994 World Bank report classifies pension systems as mainly defined by three pillars: pay-as-you-go (PAYG) pension plan, which is a publicly managed system; a privately managed mandatory savings system (fully funded); and voluntary savings’. The financial unsustainability of old PAYG systems has led many countries to re-think their pension systems. This paper reviews the pension systems of SC countries’ and tries to show the main features and trajectories of the development of pension systems in three countries that are dealing with the challenges of these systems. Since 2006, Armenia is changing its existing pay-as-you-go (PAYG) pension system to the multi-pillar, accumulation system. Azerbaijan reforming of old pension system began in 2014, the aim of which was to transfer to the mixed model (PAYG and fully funded pension schemes). Georgia is the only country in the Caucasus region where the old PAYG pension system still operates. Starting in January of 2018, the government of Georgia proposes to shift to a hybrid (mixed) pension model. As noted, the countries of the South Caucasus, like other countries, are trying to change PAYG pension system on the mixed (hybrid) pension system. This is due to the fact that solidarity (PAYG) pension system plays an important role in poverty reduction and serves a valuable welfare distribution function, so its disappearance would have many undesired social consequences. Therefore, it is advisable to introduce a more sustainable pension system. One possible solution is the introduction of mixed (hybrid) model (PAYG and the accumulated Fully Funded). Any decision about a possible reforms should be based on comprehensive analysis and a study of international experience.

Item Type: Conference or Workshop Item (Paper)
Uncontrolled Keywords: pension systems, South Caucasus
Subjects: H Social Sciences > HH Economic
H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HR Insurance
Divisions: Centres > Insurance and Public Health Center
Depositing User: Professor Tengiz Verulava
Date Deposited: 09 Nov 2017 08:20
Last Modified: 09 Nov 2017 08:20

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