On July 21, 2018 Georgian legislators approved an accumulative pension scheme, after years of discussion. As one of the requirements of the new law, employees with contracts who are under the age of 40 have to contribute 2% of their remuneration to the state-run pension fund, on a monthly basis. Although other employees are not legally required to do so, they may participate in the scheme voluntarily. This law is a first step in a larger reform of Georgia’s pension system. Opposition politicians have criticized the new law citing that it counters the country’s constitution as it introduces a new tax without a referendum. Several civil society groups also expressed criticism of the reform, questioning its legitimacy.
According to June 2018 CRRC/NDI survey that was conducted before the law was passed, only 46% of people in Georgia were aware of the proposed reform of the country’s pension system. People with tertiary education reported being more informed (57%) compared to the rest of the population. Although the new pension scheme primarily targets younger employees, young people were significantly less likely to have heard of the proposed changes (36%) compared to those who were older than 40 (53%). Ethnic minorities were also far less likely to know about the reform than ethnic Georgians (22% and 48%, respectively).
A majority were against the idea of mandatory contributions to the pension fund. If they had a choice of mandatory or voluntary contributions, only 17% would prefer the mandatory option, while the majority (61%) would choose the voluntarily option. Even people whose political sympathies are close to the ruling Georgian Dream party are significantly more likely to favor voluntary contributions compared to the mandatory ones.
Note: The full wording of the first question was: “There are several proposals regarding the pension reform. Which of these two proposals is acceptable for you? According to one of the proposals, employees under the age of 40 mandatorily contribute 2% of their salary to the pension fund every month. According to another proposal, employees under the age of 40 voluntarily contribute 2% of their salary to the pension fund every month.” For the question, “Which party is closest to you?” only first choice has been considered for the chart above.
People in Georgia need to be informed better about the new pension scheme that was recently adopted. Importantly, it lacks public support even among those who feel close to the ruling party.
The data used in this blog post is available here.
