Accumulating pension scheme

From January 1, 2019, Georgia will move to an accumulating pension scheme.Liability for the implementation of pension contributions besides the state as a result of the pension reform is imposed on: employers, resident natural persons citizens of Georgia, and foreign citizens and stateless persons permanently living in Georgia. The total percentage of the installment varies from 4% to 6% and depends on annual taxable salaries and / or self-employed income.

Participation in this Scheme is mandatory for any employee, in the part of income earned by the employee, except for the employee who turns 60 [55 in case of women] before January 1, 2019. Besides, an employee, who turns 40 before the enactment of the law [06.08.2018] and who does not want to participate in the scheme, is entitled to refuse to participate in the accumulating pension scheme. An employee who turns 60 [55 in case of women] before January 1, 2019 and self-employed individuals can participate in the Pension scheme on a voluntary basis. It should also be mentioned that “the Law of Georgia on Accumulative Pensions” offers its own definition of a salary, which differs from the definition by the Tax Code of Georgia. The law on accumulative pension defines a salary as the income received from rendering of services, which is taxed at the source, as well as the income in the form of a slary as per the article 101 of the Tax code of Georgia, according to the tax legislation [except for the income, which, under the Article 104 of the Tax Code, does not belong to income received from royalties, rent, leasing and investment in Georgia] which means that the pension contribution liability arises even in case the services are rendered by a physical person (except for several exception cases). The above pension scheme will become a very heavy burden on employers and employers if the accrued salary of the employee is determined by the amount of 100 GEL. Amounts of cash payments to be paid to the state budget and/or the personal bank account of the employee and the pension fund are given in the table

As for investment in pension assets, the pension agency should create an investment service. The Investment Board of the Pension Agency defines the investment policy related to the pension assets; Asset management is caried out by a management company (companies). Investment Council for each asset management company (if any) approves a detailed investment guide for each type of investment portfolio.