Pension as an Investment: What Beneficiaries of Armenia's Mandatory Funded Pension System Need to Know
YEREVAN, November 27. /ARKA/. All individuals born in Armenia after January 1, 1974, automatically qualify as beneficiaries of the mandatory funded pension system. They also have the option to join voluntarily. Consequently, all beneficiaries are considered "indirect" investors, as the contributions they make, along with those made by the state, are managed by two pension funds.
Decentralized management of pension assets is executed by two international funds: Amundi-Acba Asset Management and C-Quadrat Ampega Asset Management, both of which are licensed and overseen by the Central Bank. These funds invest the accumulated resources of beneficiaries within Armenia's mandatory funded pension system.
Ameriabank Investor Day
Investor Day is an event that Ameriabank organizes periodically to unite individuals interested in investing, share investment ideas and the intricacies of constructing an investment portfolio, as well as experiences, and foster the growth of an investment culture in Armenia.
In light of the public interest and significance of the subject, the third Ameriabank Investor Day was fully dedicated to the mandatory funded pension system, which commenced operations in Armenia in 2014. The fundamental provisions, principles, and operational logic of the system were outlined.
Financial Literacy and Investing Culture for Prosperity
"Our event draws those who wish to engage with experts and enhance their understanding of financial markets. The number of participants continues to increase each year," stated Artush Yengibaryan, Head of Ameriabank's Investment Tribe.
He underscored the importance of retirement planning. "This subject raised numerous questions, reflecting a low level of awareness. Even I found it intriguing to learn how investment decisions are made and what assurances are offered to beneficiaries," Yengibaryan remarked.
He conveyed his assurance that pension funds are, in a certain sense, fostering the growth of the capital market in Armenia.
"Ameriabank aims to promote an investment culture in Armenia. We host events and execute programs designed to enhance financial literacy, conduct online webinars, and visit businesses and educational institutions to increase awareness in the investment sector to meet appropriate investment objectives," stated Yengibaryan.
He emphasized that investment is one of the strategic priorities for Ameriabank. The MyInvest platform has been introduced, facilitating easier access to investing through a mobile application. Ameriabank's overarching aim is to enhance the well-being of its clients, and we are committed to doing everything within our power to realize this.
From 7.4% to 8.1%: Factors Influencing Pension Fund Returns
"The average annual return since inception (year-on-year) for the Fixed Income Fund stands at 7.4%, for the Conservative Fund at 8.0%, and for the Balanced Fund at 8.1%. This is influenced by the level of risk," remarked Hrayr Aslanyan, Deputy Executive Director and Fund Manager at Amundi-Aсba Asset Management, during an interview with ARKA.
He also provided insights on the minimal variance in returns despite the differing levels of risk. "The primary factor influencing this is the market conditions. Although the disparity between these funds was considerable in 2021, the upheaval of 2022 resulted in the highest-risk fund experiencing a more significant drop compared to the low-risk fund. Consequently, the gap in returns has diminished. By the end of 2022, the average annual return on funds was recorded at 6.1-6.2%. These statistics are currently undergoing gradual changes," Aslanyan noted.
He additionally stated that, as of the conclusion of October this year, Amundi-Aсba Asset Management oversees pension savings amounting to 713 billion drams.
During a panel discussion at Investor Day, Aslanyan emphasized that investments in pension funds are inherently long-term. Consequently, market fluctuations that result in alterations to the accumulated amounts, and even their reduction, should not alarm beneficiaries of the mandatory funded pension system.
"Investment decisions regarding the funds accumulated within the system are made based on the forecasts provided by the fund's experts and are governed by Armenian law," Aslanyan remarked.
He further mentioned that beneficiaries of the system have the option to change funds and transfer their assets without any charges once a year. They also have the liberty to decide the risk level associated with their savings.
"The funds of citizens are guaranteed by the state," Aslanyan added.-0-
