A generation gap in retirement planning in Georgia

The pension system in Georgia faces challenges. According to the World Bank, in a country with a declining working age population (see slides 6 and 7), a retirement system in which the state is solely responsible for providing pensions – as in Georgia – is unadvisable. The Government of Georgia, with the help of international organizations, has been working to reform the country’s pension system, with the latest pension reform plan approved in spring 2016. The government is set to launch the new system in October 2017. With the new plan, in addition to the basic “universal” pension, still provided by the government, the employee, his/her employer, and the government will each make contributions to the employee’s retirement savings account. Each of the contributors will pay at least 2% of the employee’s monthly salary, totaling a minimum of 6% of his/her salary in a given month. Hence, an individual’s retirement savings will consist of these contributions and the interest accumulated on the retirement account.

According to the March 2016 CRRC/NDI survey, the plurality of the population of Georgia plans to or is supporting themselves in their old age with state pensions (49%) and/or assistance from their children (31%). Roughly a quarter (27%) reported that they have done nothing, have never thought about it, or don’t know what they do or plan to do to support themselves in old age. Younger people, however, plan to rely on sources of income other than state pensions more often than older people.



Note: A show card was used for this question. Up to three answer options were accepted per interview. Answer options “Saved or plan to save money in the bank” and “Rely or plan to rely on support from my relatives (besides my children)” were named very rarely and are thus combined with the answer option “Other.”

The above chart shows the distribution of answers nationwide, but there are important differences by age. The majority (72%) of the population 56 years old and older name government pensions as a means to support themselves in old age. In contrast, only 29% of young people between 18 and 35 years old report planning to rely on government pensions when they get old.


Note: Answer options “Made or plan to make investments”, “Saved or plan to save money, but not in the bank”, “Saved or plan to save money in the bank”, and “Bought or plan to buy a house/apartment for rent or sale” were combined with the answer option “Other”. 

Government should encourage the diversity of options for retirement planning that young people already report they plan on using as it may reduce dependence on state pensions in the long term. Awareness raising campaigns about such options are also important for supporting citizens in making informed decisions, and could be integrated into the campaigns already planned before the launch of the new pension system in 2017.

The data presented in this blog post is available at CRRC’s Online Data Analysis (ODA) tool.