Friday, January 24 2014 20:12

Armenian CB: Only several thousands of citizens have chosen their pension funds so far

ArmInfo. Some 10,000 out of 250,000 citizens of Armenia that fall under the recently introduced mandatory accumulative pension system have chosen their pensions funds, Andranik Grigoryan, the head of the Department for Stability and Development of the Financial System, Central Bank of Armenia, told reporters, Friday.

He explained that most citizens are no ready yet to make a conscious choice of a pension fund, as they have no idea of the pension reforms in the country and much less of the pension funds. "People visit banks and postal officers serving pension accounts for an advice and a recommendation. However, the operators of the pension accounts are not authorized to recommend any fund to the citizens or somehow influence their choice," Grigoryan said.

Nevertheless, he went on, surveys conducted by international organizations like WB, IFC and USAID show that voluntary choice of pension funds by 10,000 people is rather good indicator for the countries like Armenia with similar economy.

"However, the CB sets no goal to either achieve or exceed the level of 10,000 people," Grigoryan said.

He did not named the managing company the citizens give preferences to not to promote any of the companies. In response to ArmInfo's question as to whether a new managing company will emerge in the country, Grigoryan said that the country's market is too small for more companies.

He recalled that the citizens have time to choose the fund and the manager till March 2014. Afterwards, the system will automatically choose a conservative fund for them.

In November 2013 the Armenian Central Bank (CB) registered the heads of the pension funds C-QUADRAT Ampega Asset Management Armenia and Amundi-ACBA- Asset-Management on 11 December, the CB press-service told ArmInfo. Members of the Amundi-ACBA- Asset-Management CJSC Board are Stepan Gishyan, Christian Pierre Noel Romei and Olivie Andre Mari Desnos. Philippe Claude Russo is appointed Executive Officer of the fund. Members of C-QUADRAT Ampega Asset Management Armenia Supervisory Board are Ernst- Ludwig Drays., Andreas Wimmer, and Martin Gratz. Arman Vardanyan is appointed Chairman of the Board.

The shareholders of Amundi-ACBA Asset Management Armenia CJSC (registered by CB of Armenia on 19 November) are Amundi Asset Management (France with 51% shares and ACBA-Credit Agricole Bank with 49% shares. Amundi Asset Management is a subsidiary of Societe Generale (25%) and Credit Agricole (75%). Amundi manages $1.3 trillion assets. The company operates in 30 countries serving over 100 million customers. It is the leader in Europe and the 9th in the world by asset management. "C-QUADRAT Ampega Asset Management Armenia" received the CB license on 29 November 2013. It was set up in October 2013 as a joint venture of German Talanx Asset Management and Austrian C- QUADRAT. 74.9% shares of "C-QUADRAT Ampega Asset Management Armenia" is owned by C- QUADRAT Investment. C-QUADRAT Investment was established in 1991. It has been listed in the Prime Standard of the Frankfurt stock exchange since 2006 and since May 2008 on the Vienna stock exchange. With offices in Vienna, London, Frankfurt and Geneva and sales activities in 17 countries, C-QUADRAT is active throughout Europe. Talanx Asset Management GmbH is the second biggest insurance group in Germany. Assets totaled nearly $180 bln. The group is active in 150 countries.

These companies offer three strategies of investment: fixed yield pension fund (FIX), conservative pension fund (CON) and Balanced pension fund (BAL). The customers are free to choose one of the given strategies. In particular, the pension fund with sustainable income implies investments of the 100% package of a customer in the debt obligations with fixed yield (government bonds and deposits of highly reliable banks) to avoid risks. The conservative funds implies investment of 75% of a customer package in the debt obligations with fixed yield and the remaining 25% in equity securities (shares). Unlike the first two funds, the balanced fund implies equal distribution of funds (50%/50%) in the debt obligations with fixed yield and shares where a beneficiary must know about the risk connected with fall of stock prices depending on the market condition and the state of the emitter- company.

To recall, the voluntary accumulative pension system was introduced in Armenia on Jan 1 2011. The system will become compulsory starting Jan 1 2014. According to the bill, the minimal pension in the country will be equal to the minimum wage, while the basic pension will total 150% of the minimum wage. The compulsory accumulative pension system will apply to the citizens born after Jan 1 1974 (the citizens below 40). Starting Jan 1 2014, 5% of their salaries will be transferred to their personal accumulative accounts. The government will transfer a similar amount (but no more than 25,000 drams).

It is noteworthy that on 25 January 2014 the Constitutional Court of Armenia suspended a number of provisions of the law on compulsory pensions until it considers the law's eight articles on Mar 28 2014. Spokesman of the Constitutional Court Hovhannes Papikyan specified in Facebook that the Court has suspended Article 76 stipulating responsibility for refusing to make compulsory pension contributions or failing to do in time and Paragraph 3 of Article 86 saying that the employees covered by the system should choose a pension fund. The claim against eight articles of the law has been laid by four opposition parliamentary groups: Armenian National Congress, ARFD, Heritage and Prosperous Armenia amid hot public protests against the pension reform.

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Armenian CB: Only several thousands of citizens have chosen their pension funds so far