The authorities have enforced a contributory superannuation system on January 1, 2019. During 18 work days this year, more than 25,000 private companies were registered in the pension agency system, and more than 300,000 individual pension accounts were opened.
According to Levan Surguladze, the head of the Pension Agency, the fund has already accumulated 20 million GEL. The figure is expected to grow, according to January indicators, to about 35 million GEL for 500,000 individual pension accounts.
The Parliament adopted the law in July 2018, and was then doomed to postponement because the initial budget did not have the necessary financial resources for the pensions system reform. However, at the end of 2018, the authorities allocated the required resources for the pension agency, and the entire reform was approved by the agency director with 10-15 thousand GEL a month.
At the end of 2018 and in the beginning of 2019, the pension fund held several meetings to discuss improving how it was perceived. These meetings were held only with businessmen, and these efforts were not sufficient to cast light on a lot of issues. As a result, we have a situation where the business sector, and our citizens have met the reform absolutely unprepared, and this factor damages the current, scant fragile trust in the pension system. According to an NDI report prepared in June-July 2018, 51% of Georgia citizens had no information about the oncoming pension system reform.
“I have contacted the pension agency and nobody has answered the phone or even responded on the indicated internet address. 90% of this reform must be prepared anew,” businessman Revaz Vashakidze noted regarding the contributory superannuation system.
“This system is not ready because nobody knows where these financial resources will go and who will be responsible if the funds required for reform and savings are embezzled,” he said and put forward an initiative to amend the Criminal Code to determine the responsibility of those persons who may embezzle the accumulated financial resources.
“Who bears responsibility if the money is lost? I think this reform is being carried out in haste, with the aim to collect money from a weak private sector. This is a superficial approach and superficially prepared project” Vashakidze said.
The founder of the Chirina company says that he does not object to the pension system reform, but the reformation should not be carried out in haste because there are a lot of questionable aspects.
The founder of Tsivi Tskali, Gocha Ghaghashvili, says that the company cannot issue salaries because of pension fund enforcement. “Bookkeepers have attended information meetings, but there are a lot of unanswered questions,” he said.
“We are facing problems with administrative issues, because we could not transfer salaries. It is unclear how to fill out forms, or where to transfer this 2%. My bookkeeper cannot issue salaries at this stage. There is some sheet to fill out, we did it, and it turned out we had made a mistake. My accountant has attended the information meetings. We suppose the problem with salary payments will be settled, and everything will be resolved. We have time till the end of the month. We are still clarifying the situation, and we will have to pay a fine in case of a mistake. This is a mandatory tax. They summon bookkeepers for training, to instruct them about the details of this process. A guaranteed pension is wonderful, but nobody knows how this system will work. In Europe, people relax after retirement, they travel a lot. If we have the same results, that would be wonderful”, the businessman noted.
The Employers’ Association also criticizes the pension reform implementation process. The organization, which represents 2,000 companies, says that a lot of technical problems arose after during law enforcement, and even today they do not know where to pay or how much to pay. The association proposes a suspension of the law until the issue is clarified.
The new pension system has brought problems for distribution companies, too. The companies complain about both technical problems and even the nature and essence of the reform. This is an unconstitutional law, and it imposes additional taxes on a business.
CBC Georgia founder Saba Kiknadze noted that certain problems arose regarding the administration of the tourism sector.
“Employers are obliged to pay 2% of their salary. For those who live nearby, the payment procedures are much simpler, but if we eat something somewhere and pay in cash, even 5 GEL above 15 GEL, it is considered as income, and a due portion must be transferred to the pension agency. There are a lot of catastrophic details, and another separate company is required to administer these details. At the meeting, we met with the Minister of the Economy, and we raised this issue, and the Minister agreed to deliver this information to the Ministry of Finance. There are a lot of stupid things. This is a Post-Soviet, Byzantine, socialist system. Now we have to continue taxing, and determine which of these taxes go to the pension fund. This is unimaginable stupidity. This reform has entirely changed administration issues. We have always said that we had a few taxes, and now the situation has changed”, Saba Kiknadze said.
Note that government officials, including the business ombudsman and the Minister of Economy, recognize that the PR campaign and information promotion campaign was to start much earlier.
According to Business Ombudsman Irakli Lekvinadze, a lack of communication is a key problem regarding pension system reforms.
“It was necessary during the due process of organization to provide detailed information to the small and medium business sectors before the implementation of the program,” Lekvinadze said.
“January is the first month when pension payments were to be made. Despite the meetings, we think more communication was necessary for financiers and accountants to answer a lot of questions in various directions. As for other topics, time will show all the gaps in this process. We are ready to provide a reaction in due course to all registered problems”, Lekvinadze said.
The Minister of Economy had announced a broad PR campaign at the end of 2018, but neither the campaign nor the PR was seen. “ We are ready in terms of our system, and in several days we will launch a strong campaign to inform and update our citizens about how the pension system will work. We are ready to launch this process on January 1. We had to start a PR campaign earlier, but we will compensate for this because we plan to carry out an intense campaign. The main thing is that the system is ready”, Kobulia noted.
The Pension Agency has to conduct an intense PR campaign about pension system reforms, but even groups such as teachers and doctors lack necessary information.
There is one more important problem: the deducting of 2% of the employee’s salary by the employer. This factor causes serious discontent among Georgian citizens. However, we should also mention that state-owned companies, including Georgian Public Broadcaster (GPB). The company management told its employees that 320,000 GEL from the company was used to pay annually for the health insurance of its staff, and will be paid to the pension fund, and the GPB has no other financial resources for serving insurance issues.
Amid similar irresponsible activities by the authorities, it is not surprising that private companies may lower salaries for their employees. And the Pension Agency, which is a key actor in this process, seems impotent. The Pension Agency has not given its position regarding this irresponsible action by the GPB.
And, meanwhile, the pension agency director will take 15,000 GEL salary, and the fate of employees from other state structures does not matter. How can they protect the rights of employees, when the Pension Agency website has not uploaded information about its employees, or their photos.
Should we entrust our billions of GEL to this agency for many years, while it has failed to even upload photos on its own website?