The National Assembly approved on Wednesday the new Armenian government’s decision to complete an unpopular reform of the country’s pension system which was launched four years ago.
The new Western-backed system is to cover 280,000 or so Armenian workers born after 1973. It requires them to earn most of their future pensions with monthly financial contributions to one of two private pension funds operating in Armenia. Both funds are owned by European companies.
The former government, which embarked on the pension reform in January 2014, said that the existing mechanism for retirement benefits is not sustainable because of Armenia’s aging and shrinking population. But it decided to make the new system optional for private sector employees until July 2018 in response to angry street protests.
Prime Minister Nikol Pashinian defended the reform when he presented his newly formed cabinet’s policy program to the parliament earlier this month. But in a major concession to Armenians affected by it, the cabinet approved on June 11 a bill that would temporarily cut their pension tax rate from 5 percent to 2.5 percent.
The move prompted Labor and Social Affairs Minister Mane Tandilian, who was one of the organizers of the 2014 protests, to step down. Her resignation has still not been formally accepted by Pashinian.
Finance Minister Atom Janjughazian presented the bill to the National Assembly on Tuesday. He insisted that the effective privatization of the pension system is “the only way to ensure that people get pensions worthy of their work after retirement.”
The parliament passed the bill in the first reading by 78 votes to 2. Seven other deputies abstained. All of them represent the Armenian Revolutionary Federation (Dashnaktsutyun), Pashinian’s coalition partner which has opposed the reform.
The Dashnaktsutyun-affiliated Minister for Economic Artsvik Minasian openly objected to the bill on June 11. His objections clearly irritated Pashinian, who said that all ministers must share “collective responsibility” for government policies.
Businessman Gagik Tsarukian’s bloc, which is also part of the ruling coalition, has also criticized the reform in the past. Still, most of its deputies voted for making the new system mandatory for all Armenians aged 44 and younger. One of them, Mikael Melkumian, said Janjughazian’s remarks on the parliament floor largely dispelled their misgivings for the time being.
Deputies from the Yelk alliance, of which Pashinian is a leader, likewise voiced conditional support for the bill. Edmon Marukian, another Yelk leader, said he expects the new government to consider modifying the new system later on. Pashinian made clear later on Tuesday that he is open to such discussions.
According to government officials, over 200,000 people are already covered by the new pension plan.