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 September 19, 2003 




Seeking Security: Improving economy offers hope of a stronger safety net for the poorest



In Armenia there are about 483,000 pensioners who had been poying social fees during their working years and now they themselves are waiting to be paid.

From October 1 pensions in Armenia will increase by 600 to 700 drams ($1.20), lifting the average pension to 7,800-7,900 drams ($13.50).

The increases of between 8 and 9.5 per cent have done little to make the republic's pensioners feel better off, however. They insist that the increase in pensions is conditioned by rises in prices.

Mushegh Atanesyan, 71, expressed his indignation at the Government.

"Officials think that we don't understand the move they have made. So, you think we don't know that soon fees for water supply, gas and electricity will increase," he says angrily. "We are going to pay these 700 drams not for our poor food but again for electricity and water supply, adding more money to that."

Former construction worker Atanesyan, who has a work history of 40 years, spends most of his pension of 9,200 drams ($15) to pay his communal bills. His pension will increase to 1,040 drams. (700 drams of average increase plus additional sum for work experience.)

"As soon as we try to rejoice at the increase of pensions we find out that prices for goods have increased as well," he says.

There are approximately 483,000 pensioners in Armenia like Mushegh, who had been paying social fees during their working years. There are also 48,000 pensioners who live on the minimum pension of 3,000-3,600 drams ($5-6). Unlike the above-mentioned pensioners, their pensions won't increase.

"People, who haven't paid any fees in their lives get social pensions because the Government, thinking about its citizens, sets a pension for them so that they can maintain their existence," says advisor to the head of the State Foundation of Social Insurance Stepan Hayraperyan.

"Of course, it's not much," he adds, "but this is what is available today. If in future things go well then this sum will increase too."

Officials administering the foundation insist that the increase in the value of pensions is linked to the country's improved economic growth. During the last three years pensions in Armenia have nearly doubled from 4,400 drams (about $7.60) to 7,900 drams. At the same time approximately 8.5 billion drams (about $14.8 million) in back payments of pension debt has been completely covered.

Stepan Hayrapetyan says social pensiona are not high, but this is what's available today.

According to Hayrapetyan, pensions have increased also as a result of improvements made in the law on insurance contributions.

"Thanks to the changes made in the law, which has been in force since April this year, the number of people paying social fees has sharply increased and in its turn it gives a possibility to increase pensions and allowances," he says.

According to him, during the past few months it became possible to increase by approximately 24 per cent the number of people paying social fees and to bring that total up to 400,000. As a result the foundation has collected approximately 3.5 billion drams (about $6 million) more compared with last year.

The annual budget of the Foundation of Social Insurance is the second biggest in the republic after the state budget. This year it comes to 42.5 billion drams (about $74 million). It is planned to increase the budget to 48 billion drams (about $90 million) next year.

According to the reformed law, employers must now pay social insurance fees (21% of each employee's salary) irrespective of whether they pay salaries to their employees or not. In past years, there was no such obligation. Employers also face fines (25 % of each employee's salary) if they fail to pay them on time at least twice during the year.

According to Hayrapetyan, this has produced a reduction of 5 billion drams ($8.7 million) in the past five months in the debts owed to workers by their employers.

"We must have seen the effectiveness and stability of the changes made in the law so that by creating a base we could have increased pensions," says Hayrapetyan.

During first eight months of this year the foundation has collected approximately 27 billion drams (about $47 million) in fees. According to Hayrapetyan, the collection rate has doubled in comparison with 1999, allowing pensions to be paid on time.

"There is such a large layer of society in the shadow economy at present that bringing them into the light will create more changes in this field. However, our goal is also to bring to light the real salary levels, which for the present moment many people hide from us," says Hayrapetyan.

According to another government decision, one-off allowances paid in cases of births, deaths will increase substantially from October 1.

The sum paid to parents at the birth of a child will increase from 5,900 drams (about $10) to 35,000 drams (about $60). The family of people who die before retirement age will receive 25,000 drams (about $43), up from 3,000 drams. This will rise to 75,000 drams for those above retirement age, compared with the present allowance of 45000 drams. This increase of "death allowance" doesn't refer to the families of unemployed.


The total bill facing the Foundation of Social Insurance for increased pensions and non-recurrent allowances is an additional 1.4 billion drams annually ($2.4 million), which must come from those who pay social insurance fees.

"The country is almost like a family, a big family," says Hayrapetyan, "You cannot spend much money if you are not sure that you are going to have an income."

 

 

 

 


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