Voluntary Private Pension Reform in Georgia: Opportunities for Employee Pensions Development

Georgia, like many other Eastern European countries characterized by an aging population and limited public financial resources, offers virtually complete non-contributory public pension coverage aiming at reducing poverty and inequality.  However, like many other countries in the region, Georgia’s pension spending and budget deficits are projected to increase and remain at high levels for decades to come.  To improve fiscal sustainability, Georgia’s government has put forth systemic reforms in the form of a compulsory pension insurance and the implementation of voluntary private pension schemes that will more closely align contributions and benefits particularly for younger cohorts of the labor force.  While the new defined contribution pension schemes, both the occupational mandatory ones and the voluntary private ones, can theoretically complement the public pension program and can support pension adequacy, more measures and policy efforts should be introduced to enhance the participation of workers in private pension programs.  This paper presents policy recommendations, which suggest that the ease of access to voluntary pensions is a key for the successful implementation of the reform.  Although the paper focuses on the Georgian pension reforms, it might hold value for some low- and middle-income countries that are considering expanding their pension coverage.