Tuesday, August 14 2012 21:31
Expert: Armenian insurance companies should strengthen corporate governance to attract pension funds
ArmInfo. In order to dampen the risks connected with pension payments, the developing insurance market should launch corporate governance standards, Gary Gegenheimer, Senior Legal Adviser, USAID/ Pension and Labor Market Reform Project (PALM), told journalists on Tuesday.
He said that the regulatory bodies, particularly, the Central Bank, should have the relevant potential to control the insurance companies. The relevant personnel should make the decisions on investments. This is important for fulfillment of the pensioners' right to receive the annuity.
The expert said that program pension payments are most popular in many developing countries. However, in the course of economic development of the countries, the private sector starts showing interest in attracting the contributed pension funds, annuity funds, and combined payments. The most important thing is that the pensioners should have a choice to receive their pensions in one or another type of payments, he said.
Gegenheimer pointed out an example from Chile's practice, where the ratio of the insurance companies' aggregate assets against the GDP increased from 5% since the 1980s to about 20% in 2004, which secured 80% of reserves for annuity payments. In 1985 3% of pensioners preferred such payments, but in 2007 their number made up 58%.
USAID PALM Project COP Rosa Chiappe, in turn, thinks that as long as the insurance market of Armenia is at an improper level, the program payments can be the most effective pension payments. She believes that there are no ideal options of pension payments and the best option is the combination or diversification of their types.
Susanna Karapetyan, Pension Advisor at USAID/PALM, said that three types of pension payments are practiced abroad: lump-sum, program and annuity payments. She pointed out that the lump-sum payments are not encouraged as the pension funds are accumulated for the gradual use after retiring. But if the funded pensions are small, they can be provided in lump-sum payments. They are also applied alongside with other types of payments.
Karapetyan also explained that the program payments are provided on a monthly basis, but in this case the pensioner must receive only the basic (social) pension guaranteed by the state after he/she receives the whole funded amount. As regards the annuity pension payments, she said that the pensioner must first of all transfer his/her funded amount to an insurance company, which will pay it off according to the scheme agreed with the pensioner.
To recall, a multi-level pension system will be launched in Armenia in early 2014.
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