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A funded pension for GeorgiaLevan Bechkhadze

Levan Bechkhadze

SEER Journal for Labour and Social Affairs in Eastern Europe, 2016, vol. 19, issue 1, 119-134

Abstract: This article is an assessment of the transition from the current Pay-As-You-Go (PAYG) system to a funded pension scheme in Georgia. The project evaluates the nature of the threats to the current system and also discusses the reform planned by the Ministry of Economy and Sustainable Development of Georgia. The proposed reform is compared to various alternative models in order to highlight the flaws and the strengths of the proposal. All the comparisons are made in terms of replacement rates and budget expenditures. From the point of view of the simulations we developed to deliver our assessment, the current proposal’s quasi-mandatory nature (people are made a member of the system but they can opt-out) is problematic; but also at issue is the level of contributions going into the system: the current proposal has contribution rates that are essentially conservative and this will deliver pensions in retirement which have only very low income replacement rates. Nevertheless, the article highlights that some form of reform of the system is absolutely essential.

Date: 2016
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