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What are the benefits of a funded pension system?

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Pension system

What type of pension system operates in Armenia?

In 2014, Armenia transitioned to a funded pension system. In this system, funds are accumulated and invested to provide income for future retirees. Pension system participants, with a co-contribution by the state, regularly contribute to their individual accounts. These contributions are managed by professional asset managers. A participant's pension after retirement depends on the total contributions made, and investment returns over time.
What are the reasons behind Armenia's transition to a funded pension system?

The previous pay-as-you-go pension system was based on the principle of generational solidarity, whereby employees made social contributions for retirees. However, Armenia is experiencing an aging population, characterized by increasing life expectancy and decreasing birth rates. Under such conditions, the financial burden on employees increased, undermining the stability of that system. Armenia transitioned to the funded pension system, which addresses this socio-economic challenge.
What is the difference between the funded pension system and the previous pay-as-you-go pension system?

In the funded pension system, funds are accumulated and invested to provide income for future retirees. Pension system participants, with a co-contribution by the state, regularly contribute to their individual accounts. Professional asset managers manage these contributions. In contrast, the pay-as-you-go (PAYG) pension system relies on current workers' contributions to pay current retirees, with no fund accumulation. While the funded system builds long-term financial security through investments, the PAYG system depends heavily on a favorable worker-to-retiree ratio and is more vulnerable to demographic shifts.
Are my pension contributions guaranteed?

Yes, according to the RA Law on Funded Pensions, the Guarantee Fund established by the Republic of Armenia guarantees the return of the contributions made by participants, adjusted for inflation.

Me as a participant

Am I a participant in the funded pension system?

If you were born on or after January 1, 1974, and are employed, work as a notary, or are a private entrepreneur, you are automatically a participant in the funded pension system. However, if you are self-employed or were born before 1974, you can choose to join the system voluntarily.
How much do I contribute to my pension each month?

If your monthly gross salary does not exceed AMD 500,000, 10% of your gross salary is accumulated in your pension account: 5% contributed by the state and 5% from your salary.

If your monthly gross salary exceeds AMD 500,000, the state contributes AMD 25,000, and the difference between 10% of your salary and AMD 25,000 is contributed from your salary. For example, with a monthly salary of AMD 800,000, the total pension contribution is AMD 80,000, where AMD 55,000 is contributed by you and AMD 25,000 by the state.

However, the total contributions are capped at 10% of the fifteenfold national minimum wage, which is AMD 112,500, starting from January 1, 2023. For instance, with a monthly salary of AMD 2,000,000, the total pension contribution is AMD 112,500, with AMD 87,500 from you and AMD 25,000 from the state. Thus, if your monthly salary exceeds AMD 1,125,000, the total pension contributions are less than 10% of your monthly gross salary (i.e. AMD 200,000).

You can remove this maximum threshold by visiting the State Revenue Committee, which will improve your financial well-being and help maintain your standard of living in retirement.
How much pension will I receive?

Your future pension mainly depends on your contributions and the return generated by the pension fund manager over the years. To estimate your pension amount, you can use our pension calculator.
When will my pension distribution begin?
Generally, you can receive pension when you reach the retirement age of 63. However, under certain circumstances you can receive the accumulated funds before retirement:
- sufficient fund accumulation when you are 55 (according to Article 49 of the RA Law on Funded Pensions)
- occurrence of illnesses included in the list adopted by the Government of RA.
- recognized disability with the third degree of limitation of the ability to engage in work activities,
- return to country of residency, for non-residents who worked in Armenia
These regulations ensure that pension funds can be accessed in case of necessity prescribed in by legislation, providing support and financial security according to those circumstances.
Are my pension contributions inheritable?

Yes, your pension contributions and fund shares are your property and are inheritable.

If the participant passes away before retirement age, their pension account shares are inheritable. If the participant passes away while receiving a pension, both the pension contributions and the annuity are inheritable, depending on the guarantee period of the annuity contract.

The regulations governing the pension system ensure that the financial security provided by pension contributions is passed on to offer continued support to families and to respect property rights.
What methods are available for receiving my pension?
At the retirement age of 63, you can receive your accumulated pension by the following means: (1) lump-sum, (2) annuity, and (3) program payments depending on the total value of the available funds.
1. Lump sum: all the accumulated pension is redeemed in a single one-time payment.
2. Annuity: your accumulated contributions are transferred to an insurance company, which will pay you a pension in equal monthly installments for the rest of your life.
3. Program payments: your contributions will continue to be managed in the pension fund, and the fund management company will distribute your pension over the life expectancy period. You will receive your pension through monthly redemptions.
For more detailed information, you can follow the link.

Pension funds

What is a pension fund?

A pension fund is a pool of assets to which you and other participants contribute for retirement income. Employees contribute to and the state co-finances pension funds during employees' active working years. Professional asset managers manage pension funds to provide long-term capital growth and ensure financial security, stability, and a sufficient source of income for future retirees.

For more information about the pension funds, click here.
What is a pension fund share?

When you contribute to the pension fund, you acquire pension fund shares, which represent your ownership. Just like an ownership certificate confirms your right to your property, these shares verify your stake in the pension fund. The number of shares you obtain is based on your contributions over time. For example, if you contribute AMD 50,000 in a given month and the share price is AMD 1,000 on that day, you will be allocated 50 pension fund shares.
How are the funds managed?

The funds are managed by a team of experienced professionals who employ a disciplined and strategic approach to investment management. The core principles of fund management are the focus on return objectives, diversification of the assets, liquidity, stable strategic allocation, and tactical allocation changes - all supported by a robust risk management framework. All funds managed by the company contribute to the transition to a sustainable economy in Armenia and abroad.

To learn more about the pension funds, follow the link.
Who is managing my pension fund?

Your pension fund is managed by C-Quadrat Ampega Asset Management Armenia LLC, a licensed asset management company operating in Armenia. Established in 2013, the Company is a joint venture between C-Quadrat Investment AG, Austria, and Ampega Asset Management GmbH, Germany, a member of the Talanx AG Group. C-Quadrat Ampega Asset Management Armenia is committed to delivering top-quality asset management services to private and institutional investors and pension system participants that align with the best international standards and modern practices. The Company is licensed and regulated by the Central Bank of Armenia.
Why can't I manage my pension contributions?

Pension fund managers provide you with professional asset management services. With expertise in asset management, fund managers are equipped with the knowledge, experience, and tools needed to manage funds and are skilled in making the best investments in your interests. Moreover, investing your pension contributions in pension funds reduces investment risks due to the multi-layer diversification of assets, saves time, and reduces operational costs of investments.
Where are the pension fund assets invested?
The investment strategy of the pension funds is based on two main principles:

At least 60% of the assets are invested in AMD, while the remaining part can be invested in foreign currency.

Depending on the type of your pension fund, up to 50% of the assets are invested in stocks, equity funds, and equity-like instruments. The remaining assets are invested in fixed-income instruments, including deposits, fixed-income funds, and money-market instruments.

On each fund subpage, you can learn about the fund's investment strategy and portfolio structure, as well as the breakdown of the fund portfolio in the reports.
What are the differences between the pension funds?
C-Quadrat Ampega Asset Management Armenia manages three pension funds.
Each of the Funds has a distinct investment strategy, as well as different portions of the equity investments in the portfolio, resulting in different risk and return profiles.
1. C-Quadrat Ampega Fixed Income (CQFIX) fund is suitable for participants with a low-risk tolerance. The fund's assets are 100% invested in fixed-income instruments, such as bonds, deposits, and fixed-income funds. The fund ensures a more conservative approach to investing, with no investments in equities.
2. C-Quadrat Ampega Conservative (CQCON) fund is suitable for participants with moderate risk tolerance. The fund can invest up to 25% of assets in equity, including stocks, equity funds, and equity equivalent instruments and the rest in fixed-income instruments, such as bonds, deposits, and fixed-income funds
3. C-Quadrat Ampega Balanced (CQBAL) fund is suitable for participants with relatively higher level of risk tolerance. The fund can allocate up to 50% of its assets to equity, including stocks, equity funds, and equity-equivalent instruments. The remaining are invested in fixed-income instruments, such as bonds, deposits, and fixed-income funds
What are the risks associated with pension funds, if any?

All investments are subject to risks. Pension funds are also accompanied by several risks, including market, credit, liquidity, operational, and other risks. These risks can affect the fund price per share and performance. Nevertheless, pension funds have a relatively low risk profile.
Fund assets are diversified according to multiple criteria, one of the most effective ways to mitigate investment risks.
You can also diversify your pension savings by contributing to more than one pension fund.

My account management

How can I choose my pension fund?
There are three ways to choose your pension fund:
- with the "My Account" webpage of the Central Depository of Armenia
- by visiting one of the Pension Account Operators
- with a bank app (check if your mobile banking allows fund selection)
What should I consider when choosing a pension fund?

When choosing one of the pension funds, it's crucial to understand their differences. Pay particular attention to their investment strategies and fund portfolios, and evaluate their performance in terms of risk and return. Choose your pension fund by determining your preferred risk level based on past experience or by answering a few questions, such as how you feel about investing in stocks or how much risk you find acceptable in investments.

When assessing the profitability of funds, consider both short-term and long-term performance.
How can I save more?

You can remove this maximum threshold of pension contributions by visiting the State Revenue Committee.

In addition to your pension contributions, you can invest in an investment fund, which is an additional opportunity to ensure your financial well-being during your retirement. By investing in the CQ Armenia Growth (CQAG) fund, you decide how much you save. The fund provides an opportunity to diversify your contributions in debt and equity instruments of local and international markets to generate additional returns in the long term.

You can learn more about the CQAG investment fund here.
How can I stay informed?

You can monitor your pension account balance via ATMs or your banking app, depending on the bank. Our website offers daily pension fund performance data, quarterly performance commentary, factsheets, and reports. You can also follow us on Facebook and LinkedIn to learn more about the funds and investments.

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"C-QUADRAT Ampega Asset Management Armenia" Mandatory Pension Fund Manager

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