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Significant pension reforms are urged in emerging Europe and Central Asia.

The aforementioned is noted a new World Bank (WB) report entitled “The Inverting Pyramid: Pension Systems Facing Demographic Challenges in Europe and Central Asia,” which was presented at the Brussels conference the WB and the European Commission.  

As per the WB, “the elderly population in emerging Europe and Central Asia (ECA) is growing, while the working age population is projected to shrink in many countries, making it imperative to undertake significant pension system reforms.”

According to economists, “a long-term solution may involve adjusting the generosity of pension systems so that they only cover the last 15 years of life for retirees, when people can no longer work productively, and to prioritize basic pension to keep the elderly out of poverty. While life expectancy has increased, effective retirement ages have remained constant or declined in some cases, leading to an increase in the duration of retirement – on average, men spend about 18 years in retirement today, while women spend 23.5 years.”

According to the authors of the report, “raising retirement ages and supporting people to work longer, as long as they are able and healthy, could help pension systems be more financially sustainable and provide for basic old-age income.”

To note, however, the supporters of the funded pension system, by reducing the employees’ salaries in the last 30-40 years, forget to mention that labor productivity has increased considerably during these years. In other words, less number of workers produces and provides more goods and services. The advocates of the funded pension system in Armenia do not remember this argument.    

The new funded pension plan, which formally came into force in Armenia on January 1, 2014, is mandatory for those born in and after 1974 and voluntary for those born before 1974. In line with this plan, 5 to 10 percent of the monthly salaries in Armenia will be deducted and mandatorily be allocated to cumulative pension funds; the latter will be reimbursed as pensions once a person turns 63 years old.      

On January 24, however, the Constitutional Court decided to suspend the execution of some components in the Law on Funded Pensions pending the hearing—on March 28—of the petition submitted by the four non-ruling-coalition parliamentary forces—the Armenian National Congress, Prosperous Armenia, ARF Dashnaktsutyun, and Heritage—, and into the constitutionality of the several articles of the law.

Notwithstanding this, some employers already are deducting the mandatory pension payment from the salaries of their employees.

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