Adopted: 21 July 2018Operative: January 2019Manager: Pension AgencyMatsne →
GEL 7.1B
Pension fund assets (mid-2024)
820,000+
Active contributors
6%
Total contribution rate
2019
Year system became operative
Overview
Georgia's Mandatory Funded Pension System
The Law on Accumulative Pension (2018) established Georgia's mandatory funded pension system — operative since January 2019. The system supplements the flat-rate state social pension (GEL 300/month in 2024) with individually accumulated savings in a professionally managed fund. All employees under 40 at the time of joining must participate; those 40 and over may join voluntarily.
The contribution structure is: 2% employee + 2% employer + 2% state = 6% of gross salary. Self-employed persons contribute 4% (2% own + 2% state match). Contributions are invested in diversified portfolios managed by the Pension Agency (pa.ge) and private fund managers. By mid-2024, the fund had accumulated GEL 7.1 billion in assets — a significant achievement for a system less than 6 years old.
The law reflects a recognition that Georgia's flat-rate state pension (GEL 300/month) is inadequate for retirement income security — it represents only 50% of the subsistence minimum for a pensioner. The accumulative system is designed to complement state pensions and build a long-term savings culture. However, coverage gaps persist: the self-employed, agricultural workers, and informal sector workers contribute at low rates or not at all.
Historical development
Building Georgia's Pension System: 1990–2024
1991–2004
Collapse of Soviet pension system. Georgia's pension system effectively collapsed during 1991-1994 hyperinflation and economic crisis. State pensions fell to near-zero in real terms. Pension age lowered to cope with administrative pressure. No funded component.
2005–2012
Flat-rate social pension restored. State social pension (sapensi) increased gradually. By 2012: GEL 80/month. Categorical top-ups for veterans, disabled, IDPs. No funded component — entirely PAYG financed from state budget.
2013–2017
Reform debate and preparation. World Bank and ILO technical assistance for funded pension design. Political debate on contribution rates and investment framework. National Bank of Georgia assigned regulatory role. Pension Agency created 2017 as management entity.
2018
Accumulative Pension Law adopted — 21 July 2018. Mandatory for employees under 40. Voluntary for over 40. 2+2+2% structure. Investment in: government bonds (50%); domestic equities (10%); international equities (20%); real estate (10%); other (10%).
2019–2023
Rapid growth. GEL 7.1B accumulated by mid-2024. Average account: ~GEL 8,600. Return rate: 8.4% average annual nominal return 2019-2023. Private fund managers introduced 2022 — GEL 1.2B under private management. Constitutional challenge dismissed by Constitutional Court (2020).
Pension Fund Asset Growth — 2019–2024 (GEL Billions)
Cumulative pension fund assets under management. Source: Pension Agency of Georgia.
Source: Pension Agency of Georgia quarterly reports 2019–2024 (pa.ge). GEL values in nominal terms. Growth includes contributions plus investment returns (avg. 8.4% annual nominal 2019-2023).
Art. 1: Mandatory participation — all employees under 40 at time of first employment in Georgia after January 2019. Art. 2: Voluntary participation — employees 40 and over; self-employed persons (any age). Art. 3: Contribution rates — employee: 2% of gross salary (automatically deducted); employer: 2% of employee gross salary; state: 2% matching contribution. Total: 6% of gross salary. Art. 4: Self-employed — contribute 4% of gross income (2% own + 2% state match, capped at GEL 24,000 annual income for state match purposes). Art. 5: Platform workers — defined as employees of the platform for contribution purposes (2024 amendment). Art. 6: Contribution collection — tax authority collects with income tax; transfers to Pension Agency monthly. Art. 7: Individual pension account — each contributor has personal account at Pension Agency. Art. 8: Account portability — account follows contributor regardless of employer change.
GILS note: The 6% contribution rate is relatively low compared to EU systems (typically 10-20% of salary). Actuarial modelling suggests a worker contributing for 30 years will accumulate sufficient savings for approximately 30% replacement rate at retirement — combined with the GEL 300 state pension this should reach 60-70% of final salary, approaching ILO C102 standards.
Chapter II — Investment and Management
Articles 9–16
How Pension Savings Are Invested
Art. 9: Pension Agency manages the default ('conservative') fund. Art. 10: Private fund managers licensed by NBG may offer alternative funds — contributors choose fund. Art. 11: Default investment allocation: state securities 50%, domestic equities and bonds 10%, international securities 30%, cash and equivalents 10%. Art. 12: NBG oversees fund manager licensing, investment limits, and reporting. Art. 13: Annual return disclosure — Pension Agency publishes fund performance report. Art. 14: Fees — Pension Agency charges maximum 0.7% annual management fee; private managers 1.0-1.5%. Art. 15: Guaranteed minimum return — state guarantees inflation-rate minimum return on contributions (not investment return). Art. 16: Death benefit — on contributor death, accumulated balance transferred to designated beneficiary.
GILS note: The investment allocation (50% state securities) is conservative and appropriate for an early-stage fund but will need to evolve toward higher equity allocation as the fund matures and the investment infrastructure develops. The NBG regulatory framework is internationally aligned (OECD Pension Fund Guidelines).
Chapter III — Retirement and Benefits
Articles 17–22
Accessing Pension Savings
Art. 17: Normal retirement age — women: 60; men: 65 (harmonised from 2023). Art. 18: Early withdrawal — not permitted except in cases of: terminal illness, disability preventing work, emigration (permanent). Art. 19: Minimum balance threshold — accounts below GEL 5,000 at retirement may be withdrawn as lump sum. Art. 20: Options at retirement — lump sum withdrawal; annuity purchase from licensed insurance company; phased withdrawal programme. Art. 21: Minimum annuity — if accumulated balance exceeds GEL 50,000, minimum 70% must be converted to annuity. Art. 22: Tax treatment — contributions exempt from income tax; investment returns tax-exempt; retirement withdrawals taxed at 5% (preferential rate).
GILS note: The annuity market in Georgia is underdeveloped. Only 2 licensed annuity providers exist. When the bulk of contributions mature in 2049-2055, there will be significant annuity demand that the current market cannot meet. NBG should begin licensing additional providers and developing the annuity regulation framework now — not in 2045.
Major achievement: GEL 7.1 billion accumulated in 5 years. 820,000+ active contributors. Average annual return 8.4% nominal (2019-2023). Private fund management introduced 2022 — creating competition and choice. System survived Constitutional Court challenge. The accumulative pension is becoming a genuine institution.
Coverage gaps: An estimated 40% of informal sector workers do not contribute. Agricultural self-employed contribute at very low rates. Gig economy workers' inclusion (2024 amendment) is progress but enforcement unclear. Women have lower average balances than men due to gender pay gap and part-time work patterns. State pension (GEL 300) remains inadequate — 50% of pensioner subsistence minimum.
GILS Policy Recommendations
Five Priority Reforms
Recommendation 01
Increase state pension to 80% of pensioner subsistence minimum
The GEL 300 state social pension is 50% of the pensioner subsistence minimum (GEL 600/month, Geostat 2023). The funded pension will not mature for 25-30 years for current young workers — meaning today's retirees depend almost entirely on the state pension for income. Increase to GEL 480/month (80% of subsistence minimum) by 2026, with annual indexation to subsistence minimum. Estimated fiscal cost: GEL 420M/year (2.1% of GDP). WB assessment: 'affordable within current fiscal trajectory'.
ILO C102 Art.67 (40% replacement rate) · World Bank Georgia Pension Assessment 2023 · EU Social Protection Report
Recommendation 02
Voluntary contributions incentive — tax top-up for low earners
Workers earning below the median salary (approximately GEL 1,200/month) benefit less from the tax exemption on contributions (their marginal rate is 10-20% not 20%). Introduce a state top-up: for every GEL 1 of additional voluntary contribution above the mandatory 2%, the state adds GEL 0.50 (up to GEL 50/month additional state contribution). Estimated cost GEL 25M/year; targets exactly the lower-income workers with largest long-term retirement gap.
UK (Nest auto-enrolment model) · Lithuania (state top-up for low earners) · Poland (PPK scheme)
Recommendation 03
Address gender pension gap — parental leave contributions
Women's pension accounts are substantially lower than men's due to: gender pay gap, part-time work, and contribution gaps during parental leave. State should pay contributions during maternity leave period (730 days): 2% employer + 2% state contribution based on pre-leave salary level. Cost: approximately GEL 35M/year. This ensures caregiving does not create a pension penalty — a requirement under Georgia's Gender Equality Law and CRPD obligations.
Germany (Kindererziehungszeiten) · Sweden (pension credit for child years) · EU Directive 2019/1158 Art.8
Recommendation 04
Develop annuity market — NBG regulatory action
Only 2 licensed annuity providers exist. When current contributors retire (peak years 2049-2060) the annuity market will face demand far exceeding current capacity — estimated GEL 25B in accumulated savings needing conversion to annuities. NBG should: (1) issue annuity market development plan by 2025; (2) license 5 additional providers by 2027; (3) develop group annuity product for small-balance retirees (below GEL 50,000); (4) consider state-backed longevity insurance to cover tail risk.
Netherlands (annuity market regulation) · Australia (Choice of fund model) · UK (Pension Wise guidance programme)
An estimated 300,000-400,000 informal sector workers — primarily in agriculture and small trade — do not contribute to the funded pension. Introduce a simplified flat-rate contribution option: GEL 30/month self-paid (online or through Bank of Georgia) + GEL 20 state match = GEL 50/month accumulated. No income reporting required. This follows the Kyrgyzstan informal sector pension (UNFPA-supported) and India's Atal Pension Yojana model — proven able to reach informal workers through simplicity.
India (Atal Pension Yojana: 52M informal contributors) · Kyrgyzstan (informal sector pension) · ILO social protection floors
The funded pension is perhaps Georgia's most successful financial institution — GEL 7.1 billion accumulated in 5 years, a 8.4% annual return, and growing contributor trust. The challenge now is three-fold: ensuring today's retirees are not left behind with an inadequate state pension; closing coverage gaps for informal, agricultural, and gig workers; and developing the annuity market before the harvest season arrives in 2045.
— GILS Research Position Paper on Pension Reform, September 2026
ILO Convention
Subject
Ratified
Compliance
Key Gap
C102
Social Security (Minimum Standards)
a
a
State pension at 50% subsistence minimum below C102 Art.67 (40% replacement rate)