The existence of pension schemes does not count for a long period, but its obligation has been historically proven, as the experience of countries has shown that the countries that have the best practices provide better social protection of the population when retiring. The article discusses the redistribution of pension assets worldwide, pragmatically and theoretically evaluating the pros and cons of retirement plans.
The implementation of the pension reform in Georgia has been delayed many times due to the socio-economic situation, accompanied by the psychological attitude of the population towards distrust of the state. Georgia is on the path to European integration, where one of the most important requirements is the proper protection and social equalization of the socially vulnerable, while the existence of pension schemes ensures the accumulation of large amounts of funds, which can play an important role in capital and financial markets.
The advantages of the existence of pension schemes may be reflected in the permanent increase of the equalization ratio, but it should be noted that at such times the macroeconomic indicators of the state should be relatively stable, such as inflation, stability of the national currency and others.
As of today, the tasks set before the Pension Agency in Georgia are quite ambitious and require effective management, as the pension reform takes only a few years.In the social security system of the population, the pension is a mechanism for maintaining a stable material condition during the period of disability. Following in the footsteps of the development of mankind, pension systems were improved, the main purpose of which was to replace the average income per capita during the working period in a way that would not worsen living conditions. Therefore, the pension replacement rate has become a measure of the evaluation of the pension system of a country. The replacement rate in the pension systems of developed countries is in the range of 60-80%, in developing countries it is 15-30%, which is systematically subject to adjustment.
Georgia, despite the normal rate of economic growth in the last decade, is not distinguished by a pension provision mechanism.
From the day of independence, the state basic pension was periodically subject to changes. The change, however, was related not so much to the approach to the subsistence level as to the subsequent promises of a change of government.
At the present stage, the pension system is in the process of modification, which aims to ensure adequate pension income, fiscal sustainability of pension expenditures and a more effective response to demographic changes in the population.
Developing and developing countries are trying to equalize the time of retirement of the population, which is often difficult to achieve and requires both economic and political decisions, because the financing of social security from the state budget requires large expenditures. Which can often be the result of the devaluation of the national currency and high inflation, which in itself can be seen as an impediment to economic development.
The increase in social spending is often the subject of controversy among scientists-economists, for example, for the development of the state, what kind of spending will be more effective, financing social or capital projects ?! Often, the increase in capital expenditures, at the expense of the social situation, is not considered a popular political decision, because at this time the dissatisfaction of the socially vulnerable segments of the population increases.
One of the goals of the accumulative pension is to achieve social equality and a high replacement rate, but how much it will work in Georgia is also a question, because the unemployment rate and the self-employed are high in terms of labor force, in particular, about 30% of the labor force The amount of monthly salary that is published statistically is also problematic, because the calculation methodology is often disputed and there is no minimum wage at the level of legislation.
The main functions of the Pension Agency are to invest the accumulated funds, but investments in investment assets are not defined by the National Bank and are quite narrow, for example, foreign practice allows pension funds to invest funds in both real assets and foreign financial markets. As mentioned, the implementation of such investments by the Pension Agency should be allowed in Georgia and should be used to finance national, strategic projects.
Ensuring the stability of inflation and the national currency in Georgia remains a challenge. In the event of inflation approaching double digits, pension savings will lose effectiveness.
Also noteworthy is the gender imbalance when receiving a pension, namely in terms of average salary and life expectancy, a man's salary is about 4 times higher than a woman receiving a pension, which should be considered unfair, the state will have to adjust the retirement age in the future.
Finally, it should be noted that the pension reform, despite its shortcomings, should be considered a step forward, but it needs to refine certain issues, diversify asset management and economic stability, which will not be easy to achieve.
8.8. PECULIARITIES OF BUILDING PENSION SYSTEMS IN DEVELOPING COUNTRIES: AN EXAMPLE OF MALAYSIA