Funded pensions to be made obligatory for public servants only

Funded pensions to be made obligatory for public servants only

PanARMENIAN.Net - On Tuesday, June 17 Armenia’s government approved a package of amendments to the funded pension law and other relevant laws to implement the Constitutional Court’s decision, the government’s press office reports, according to ARKA.

The amendments shield employees’ income from reduction after the enforcement of the new scheme. The obligatory funded pension scheme will apply only public servants, whose salaries will be raised on July 1, and for the private sector’s employees it will be voluntary.

The new pension system that took force on January 1, 2014 and was suspended later since found contradicting the Constitution requires that all Armenian citizens born after 1973 pay social security taxes equivalent to 5 percent of their monthly wages, which will be matched and doubled by the government.

If an employee’s salary exceeds AMD 500,000, the government pays AMD 25,000.

Prime Minister Hovik Abrahamyan said in this connection that on July 1 about 200,000 public servants will have their salaries increased.

“This fact will serve as a basis for setting social payments’ sizes,” he said. “The allocation of AMD 38 million by the government for increasing their salaries was a radical step, and people should know this,”

On January 24, Armenia’s Constitutional Court suspended some provisions of the new, controversial law that aims to reform the country’s pension system to launch a detailed inquiry into the constitutionality of the law.

The highest court of the country suspended Article 76 of the new law, which provides for penalties for failed or delayed pension tax payments, and the third paragraph of Article 86, which obligates employed citizens to choose a pension fund, among other parts of the law.

On April 2, the Constitutional Court of Armenia found some provisions of the new pension law contradicting to the Constitution and voided them instructing the government to make changes here.

The National Assembly passed amendments to the law suspending enforcement of the compulsory component of the new pension scheme. It means compulsory component was transformed into voluntary.

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