Central Bank: Efficiency of compulsory funded pension system management in Armenia to be improved

ArmInfo. On March 1, the  National Assembly of Armenia adopted the draft amendments to the Law  "On Compulsory Funded Pension" in the second and final reading.  

Deputy Chairman of the Central Bank of Armenia Nerses Yeritsyan said  that the draft amendments aim to enhance the efficiency of the  compulsory funded pension system management and to increase its  transparency. In particular, the draft law regulates the process of  compensating for the damage received by the participants of the  pension funds. It also expands and toughens the responsibilities of  the managers of these funds.  The persons with high incomes, who have  already made sure of the efficiency of the funded pension system, are  allowed to voluntarily continue their participation in the system by  paying 10% of their salaries (otherwise, the current 5% rate will be  applied).  The managers of the funds will get an opportunity to  invest 10% (versus the current 2%) of all assets in venture and  private funds. This will make it possible to finance the highly-  productive sectors of industry. The draft law also envisages  enhancement of transparency of the funds. At present, an individual  has an opportunity to apply to the funds for accountability once a  year.  Under the amendments, it is possible to apply for annual  reports at any moment via electronic means. In addition, the citizens  of Armenia, who participate in foreign funded pension funds will be  able to transfer their money to the funds in Armenia and to manage  them.

Earlier, ArmInfo reported, citing the Central Bank that within  mandatory funded pension system the number of participants of the two  pension funds-C-QUADRAT Ampega Asset Management Armenia and  Amundi-ACBA- Asset-Management reached 155 thousand people by November  1, 2016. 65 thousand of them are representatives of state sector and  remaining 90 thousand of private sector. The press-service of the  Armenia's Central Bank has told ArmInfo that from the moment of  creation of these two funds (November 2013) their yield has reached  25.9% (the cost of one common share has grew from 1000 to 1259  drams). For the 10 months of 2016 yield of the pension funds totaled  annual average 14.4%. According to the source, as of November 1 2016  the abovementioned funds accumulated 57.2 bln drams, 29% of which or  17 bln drams are deposits in banks, 5% or 2.8 bln are invested in  bonds of corporate, mortgage and international organizations, 41% or  23.3 bln in state bonds, 25% or 14.1 bln in securities of foreign  investment funds (ETF - Exchanged traded funds, including stocks of  such companies as Apple, Google, Microsoft, Nestle, Toyota, Nissan,  Sony, Coca-Cola etc., as well as US state bonds and Gold mining fund  securities). HayPost, Araratbank, Ardshinbank, HSBC Bank (Armenia),  INECOBANK, Converse Bank, Armbusinessbank and VTB Bank (Armenia) are  pension account operators. Citizens can receive information about the  funds on their account via epension.am website, identification card,  as well as through ATMs of ArCa network.

To note, in November 2013 the Armenian Central Bank (CB) registered  the pension funds C-QUADRAT Ampega Asset Management Armenia and  Amundi-ACBA- Asset- Management.  The shareholders of Amundi- ACBA  Asset Management Armenia CJSC (registered by CB of Armenia on 19  November) are Amundi Asset Management with 51% shares and ACBA-Credit  Agricole Bank with 49% shares. French Amundi manages $5 trillion  assets. "C-QUADRAT Ampega Asset Management Armenia" received the CB  license on 29 November 2013. 74.9% shares of "C-QUADRAT Ampega Asset  Management Armenia" are owned by C- QUADRAT Investment and 25.1% by  German Talanx Asset Management GmbH. The group manages $130 bln  assets.

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 fund 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 issuing company.

To recall, the compulsory accumulative pension system was introduced  in Armenia on January 1 2014 and applies to the citizens born after  Jan 1 1974. According to the new law on Accumulated pensions, the  minimal pension in the country will be equal to the minimum wage,  while the basic pension will total 150% of the minimum wage. Starting  Jan 1 2014, 5% of citizens' salaries have been transferred to their  personal accumulative accounts. The government will transfer a  similar amount (but no more than 25,000 drams).