According to the evaluation by the Parliamentary budget office (PBO) based on the assumption that only those employees will participate in the accumulative pension scheme who are obliged to do so by law, in 2018 (taking into consideration the date enactment of the law):
- Government’s contribution in the pension fund will be 71 mln GEL (including both: contribution to the public and private sector employees) and the pension fund will amount to 166 mln GEL
- The Impact on the government revenues is negative and it will decrease by 21 mln GEL
The Effects on the general budget have two directions:
a) The pension scheme will increase the government expenditure due to the mandatory contribution from the government;
b) it will decrease the budget revenues, as the 2% contribution of employees is exempted from the income tax and the 2% contribution from the employers will increase their costs, therefore will diminish the profit tax base and the profit tax itself.
According to the PBO, the man turning 30 in 2018 with an average monthly salary, at the early stage of his retirement (assuming that the social pension will maintain 180 GEL) will get 1,123 GEL, while the woman turning 30 in 2018 with an average monthly salary - 547 GEL. This gap is induced by different factors:
- Man’s average monthly salary is much higher compare to the woman’s;
- Man’s retirement age is higher, therefore they save for a longer time period;
- Man’s life expectancy is shorter and they “use” their amount for a shorter time period
All the assumptions used in the evaluation are accurately described in the publication.
Based on the international experience, the main positive effect of the accumulative pension scheme is to maintain fiscal sustainability along with the decent pension for all, taking into account the aging process.
In addition to this, while country safer from the low saving rate, the potential positive effect of the accumulative pension scheme is to stimulate the country’s total savings by accumulating huge amount of resources in the fund, the contributions’ tax exemption for the participants will also play the significant role. Moreover, according to the international experience, the implementing process of the accumulative pension scheme should also consider several key issues: the effective institutional framework; the effectiveness of the managing the fund and the other sensitive issues with respect to the macroeconomic risks.
For more details see the complete document (available in Georgian)