Nino Davitaia
The University of Georgia
Associated Professor
Tbilisi, Georgia
ORCID: https://orcid.org/ - 0009-0004-0635-3373
Nino Davitaia
The University of Georgia
Associated Professor
Tbilisi, Georgia
ORCID: https://orcid.org/ - 0009-0004-0635-3373
Pension Reform in Georgia- Main Results and Challenges
Abstract
Pension policy is a very important part of any country’s social welfare, without a strong and determinant pension plan, it is very difficult to manage a nation’s aging process and hence adopt proper social policy. After the Declaration of Independence, Georgian economists and social welfare representatives started to think in that direction. Georgia introduced the aggregate pension plan in 2019, which is obligatory for any employee under 40 years.
Due to the importance of the mentioned issue, the main point of the presented research is to analyze the pension plan in Georgia and evaluate its weaknesses and strengths, deep analysis of current changes in the pension plan will be discussed and an evaluation of its influence on the financial stability and pension plan participants will be presented.
The proposed article will analyze the pension plans for different countries, like South America and the United States, where plan was influenced by the financial crises of 2007-2009, as well as plans for post-soviet countries.
Pension Fund in Georgia adopted the risk management decree which includes investment priorities, however, nowadays mostly all raised funds are deposited in commercial banks. For effective policy making is it absolutely necessary that declared policy and real actions to be in full accordance; we must also point out that at this moment pension funds never had any capital adequacy requirements, hence this may add additional risks to the investment actions.
Recently we have analyzed risk management concept, which has operational, accordance and reputational risk treatments. According to the decree one needs to consider risk management framework, so-called risk appetite and informational security issues, as well as risks associated with human capital and its elimination through pieces of training, business continues framework and fraud and money laundering risk assessments.
Recently parliament of Georgia declared very big changes in pension fund activities, namely, according to proposed changes in law, investment committed will be eliminated and all decisions will be made by the fund committee, which will be responsible for fund management and investment decisions. This committee will have members from 9 up to 15 and will be formed by the government, participation in parliament will be minimized and the head of committed will be assigned by the premier minister.
Taking into consideration the current political instability and processes, this decision may harm the pension fund’s reputation, which is an additional risk.
The paper will analyze current ongoing issues with pension funds and provide recommendations for financial soundness and accordance with best international practice.
Keywords: Economics, Business, Law