Eter Eradze, age 67, worked for 20 years and can now expect a pension raise of 7 GEL this fall. “My husband is a pensioner too and he will receive a ten lari supplement to his pension. We can hardly scrap by with our pensions for a week only and this supplement will hardly change anything,” she says. “Prices are on the rise every day. We bought 1kg wheat flour for 60 tetri before and now we are paying 90 tetri. The price of transport and fuel is also on the rise. With the rise in inflation, the pension raise of just 5 GEL or 10 GEL for the impoverished people is ridiculous. The government should have increased pensions by at least 50 GEL.”

A work-based pension scheme is being put in place, and from September, pensioners will receive, on top of their base pension of 38 GEL, additional money based on their years of employment. Retired Georgians who worked for more than 25 years will get an extra 10 GEL each month. Those who worked for 15 to 25 years get a supplement of 7 GEL, 4 GEL for five to fifteen years of employment, those who worked for less than five years get 2 GEL.

Georgia has a population of 900,000 pensioners while only 700,000 of them have been employed. However, the government is still paying them the minimum pension – 38 GEL. As the percentage of the world’s population over the age of 65 rises, pension plans must accommodate the larger number of elderly. This is particularly challenging in countries that have unfunded pay-as-you go social security systems. Some countries have opted for voluntary pension schemes where people n are accumulating their pension savings in private pension funds. There is no universal pension model in the world and it is a matter of individual nation’s choices. For instance, Russia has already decided to assign money from the state budget to stimulate contributions to private pension funds – if you start saving money in a private pension fund, the state will add on some interest. Georgia has not provided any such incentive thus far.

The scheme has already been running in Tbilisi and Batumi and is being implemented in all regions. Pensioners are required to submit their employment record papers to the Foundation for Social Insurance. Then the Foundation will have to check the validity of the records of each pensioner. If his employment cannot be verified with documents, he will not receive his pension and will have to go to court and he will not receive pension supplement until the court makes decision. However, if a pensioner proves in court that he had a job, the Foundation must reimburse him for the missed months. It is the IDPs, who left their employment papers in Abkhazia and South Ossetia, who will find it most difficult to prove seniority. The government has not decided yet whether short-term employments like, two-week and one-month jobs will be considered.

The Georgian government has found another way to deal with rising pension spending – after social and income taxes have been combined in 2008, an employee will have to think of his pension himself. These tax changes no longer obligate an employer to pay social taxes. The employed population will face a choice – either pay part of their salary to a private pension fund or to the state, which will accrue in a special pension fund that they will receive after retirements.

Despite a slight raise, the pension in Georgia remains one of the lowest of the post-Soviet countries and is almost five times less than the living wage. According to the recent modified calculations by the Department of Statistics, the living wage in Georgia is 150 GEL. So, even if the government increases the pensions by 100 Gel it still will be insufficient to meet minimum requirements.

Sergo Dughashvili, an 82-year-old pensioner says, “I will receive just 10 GEL more but I am still happy. This will not help me out from poverty but will be enough to buy bread for some more days. Besides, I have discounts on medications, some 10-20 tetri off but it is still good. I hope that they will increase the pensions a bit in the near future.”

The Finance Ministry has not yet calculated how much it will have to provide for pension supplements. According to rough estimations, the new plan will cost the government an additional 16 million GEL. This is not a big enough sum to make any changes on consumer prices but it will possibly stimulate slight inflation.