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Government Stands Firm On Pension Reform


Armenia - A demonstration against controversial pension reform outside the ruling Republican Party's headquarters in Yerevan, 15Nov2013.

Armenia - A demonstration against controversial pension reform outside the ruling Republican Party's headquarters in Yerevan, 15Nov2013.

The government made clear on Monday that it will not roll back a controversial reform of the national pension system that has sparked protests by Armenia’s leading opposition groups and many young professionals.

Three members of Prime Minister Tigran Sarkisian’s cabinet held a joint news conference to rule out any changes in the ongoing transition to a new system that will require working-age Armenians to make more social security contributions.

The nearly decade-long reform is due to be essentially complete on January 1 with the entry into force of legal amendments approved by the Armenian parliament earlier this year. They stipulate, among other things, that working individuals born after 1973 will have to transfer at least 5 percent of their income to private pension funds in addition to social security taxes paid by their employers.

The de facto extra income tax is fiercely opposed by some categories of the population, notably white-collar workers employed in Armenia’s information technology (IT) sector. It has also met with strong resistance from opposition groups as well as the opposition-leaning Prosperous Armenia Party (BHK). Lawmakers representing them joined forces last week to force an emergency debate on the matter in the parliament. The parliament’s pro-government majority thwarted the planned session through a boycott, however.

Activists representing the protesting workers said on Monday that they will continue challenging the reform with more street protests and an appeal to the Constitutional Court. “We are going to fight till the end,” one of them, Hayk Avetisian, told RFE/RL’s Armenian service (Azatutyun.am).

Avetisian reiterated the protesters’ claims that the new mechanism for retirement benefits should not be mandatory because it discriminates against a part of the country’s population aged 39 and younger. “People must not be forced to get smaller wages,” said another activist, Harutiun Aghlamazian.

The chief of the government staff, Vache Gabrielian, dismissed as “more than ridiculous” the claims that the transition to the so-called pay-as-you-can system is unconstitutional. He said the authorities see no need to debate the reform because it has already been scrutinized by the National Assembly for the past several years.

“Discussions have gone through all institutional bodies,” Gabrielian said. “Addressing it again now would only create a new wave of confusion among people.”

For his part, Labor and Social Affairs Minister Artem Asatrian repeated the government argument that the existing pension system is not sustainable given the country’s aging population. “If we carry on like this, the financial burden on the state budget will grow with every passing year,” he said. “So we do need to expedite a transition to a pension system financed from several sources in order to be able to pay citizens normal pensions.”

The government also argues that the new system is inherently more equitable because it will allow well-paid workers making more social security payments to receive significantly higher pensions after retirement.

The critics say, however, they have no long-term trust in new and hitherto unknown private pension funds.
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