The continuing economic crisis has forced the Armenian government to delay by one year a sweeping reform of the national pension system, the head of the country’s state pension fund said on Monday.
Under a reform plan approved by the government years ago, Armenia was due to switch in January 2010 to a new system whereby the amount of monthly benefits paid to retired citizens will depend on their and their employers’ lifelong contributions to the fund. The existing pay-as-you-go system essentially does not differentiate between pensioners’ employment histories.
The State Social Security Service already keeps track of social security contributions of all officially registered workers. Each of them has had a personal pension account and social security number since 2005.
According to Vazgen Khachikian, the head of the service, the government has decided to introduce the new system in January 2011 because of Armenia’s worst economic downturn since the early 1990s and the resulting change in government priorities. Speaking at a news conference, he did not exclude that his agency subordinated to the Ministry of Labor and Social Affairs will incorporate some of the employee and employer payments of the past four years into its future pension calculations.
The average monthly pension in Armenia has steadily grown over the past decade but still stands at a modest 26,000 drams ($68), reflecting the country’s enduring socioeconomic woes and aging population. According to government data, Armenia’s officially registered workforce numbering some 460,000 people is already outnumbered by 520,000 or pensioners, hampering a further sizable growth in pensions.
Khachikian warned that the imbalance will deepen in the coming years and become “deeply tragic” by the 2030s unless the demographic situation in the country improves markedly. It has worsened dramatically since the early 1990s amid mass out-migration of working-age Armenians and falling birth rates.
Some 42,000 babies were born in Armenia last year, sharply down from the 1989 level of 81,000. Khachikian downplayed a slight increase in the birth rate reported by the government in the last few years. He said it will likely start falling again in the coming years as generations of young Armenians born in the 1990s reach reproductive age.