Compulsory component of funded pension system comes into effect on 1 July 2018 for all Armenian citizens born after 1 Jan 1974

ArmInfo. The compulsory  component of the funded pension system will come into effect on 1  July 2018 for all Armenian citizens born after 1 Jan 1974, Deputy  Chairman of the Central Bank of Armenia Nerses Yeritsyan said in the  Parliament, when presenting the amendments to the Law "On compulsory  funded pension system" in the second reading.   

Yeritsyan said that at the moment the pension funds managing the  funded pension system ensure such a high level of controllability  (27%) that there is no need to index the invested funds. He stressed  that the annual state co-financing in the pension funds makes up 14  bln AMD, and the population also transfers a similar amount.     

Yeritsyan refuted the popular opinion that these funds will be  pulverized as soon as Armenia joins the ruble zone. He noted that  there are no prerequisites yet for Armenia's accession to the ruble  zone. "This issue is not being discussed", he said, noting that the  EEU does not want to repeat the mistakes made by the European Union.  The matter concerns integration of the EEU financial markets by 2025,  which is necessary for activities of Armenian banks, brokers and  dealers on the EEU markets without additional licenses. Yeritsyan  added that the funded pension system is being applied with due regard  for the best models of foreign countries. 

On Feb 28, the Armenian Parliament started discussing the draft  amendments to the "Law on compulsory funded pension" in the second  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 emitter- 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).