In Georgia, there are currently two pensions systems: (1) the state pension and (2) the non-state pension funds. The state pension is a PAYG (unfunded) pension program providing pensions for: (a) old age, (b) persons with qualifying disabilities and (c) survivors due to loss of a breadwinner. The non-state pension funds are voluntary pension schemes mainly established by a few number of employers for the benefit of their employees. The pension for the elderly under the state pension program is universal because benefits are paid irrespective of the needs or economic status of the pensioner. The principal purpose of this report is to present the need and basis for creating a Mandatory Savings Pension System, also known as the World Bank Pillar II System, with the immediate objective to create a pension system that requires the automatic participation of formally employed individuals from both the public and private sectors who earn monthly wage or salary of 400 GEL or more and who are between ages of 15 and 45. As such, this report focuses on the old age pension system. In order to comprehensively research this report, the authors performed the following analytical tasks:
- Examined the features, operations and functioning of a mandatory savings pension per the Georgian context and perspectives;
- Discussed the preconditions of Pillar II Pension System,
- Analyzed the rationalization of the Multi-Pillar Pension Systems to the Georgian case study.
Thus, the report analyzed the current Georgian pension systems and then hypothesized how the Georgian pension systems may be used as a base for establishing a Mandatory Savings Pension System. The authors recommend the combination, co-existence and correlation of these three pension pillars that should mirror the classical models of the World Bank Multi-pillar pensions.