How to calculate – Accumulated Pension

04/04/2024

Georgia’s pension system switched to an accumulative model on January 1, 2019. The accumulative pension scheme involves contributions from the employer, the employee, and the state.

Citizens of Georgia (excluding non-residents) and residents will each have individual pension accounts created by the pension agency. These accounts will be managed by the investment service, which will invest pension assets in international and financial instruments.

Both the employee and the employer transfer 2% of the employee’s monthly taxable salary to the individual pension account within 15 calendar days after the salary is issued. This contribution applies to all employees whose annual taxable salary does not exceed 60,000 GEL.

The state contribution is 2% for individuals with an annual taxable salary or income of up to 24,000 GEL. For those with an annual income or salary between 24,000 and 60,000 GEL, the state contribution is 1%. Contributions from the employer and the state are made only until the employee reaches retirement age.

The interest earned on the accumulated pension considers bonuses and premiums.

You can find a clearer overview of these figures in the following table:

Annual Income	Employee	Employer	The State
< 24,000 - 60,000 GEL	2%	2%	2%
< 24,000 GEL	2%	2%	2%

Example #1

Let’s consider Levan’s case. His taxable salary amounts to 1250 GEL, which means he receives 1000 GEL after deductions. With an annual taxable income of 15,000 GEL:

1250 * 12 = 15000

15000 < 24000

Consequently, the state will contribute 25 GEL monthly, which equals 2 percent of his taxable salary:

1250 * 0.02 = 25

Both the employer and Levan will also contribute 2%, amounting to 25 GEL each. This means Levan’s salary will be reduced by 25 GEL, resulting in:

1000 – 25 = 975 GEL

Example #2

Now let’s look at Levan’s scenario again. With a taxable salary of 3750 GEL, he receives 3000 GEL. His annual taxable income sums up to 45,000 GEL:

3750 * 12 = 45000

45000 > 24000

In this case, the state will contribute 37.5 GEL monthly, representing 1 percent of his taxable salary:

3750 * 0.01 = 37.5

The employer will charge 2%, amounting to 75 GEL:

3750 * 0.02 = 75

Similarly, Levan himself will contribute 2% from his salary. Thus, with his salary reduced by 75 GEL:

3000 – 75 = 2925 GEL

It will be voluntary for the self-employed.

For self-employed individuals, participation will be voluntary. As they act as both employers and employees, they will transfer 4% of their taxable income if they choose to participate. This applies when their income does not exceed 60,000 GEL.

Example #3

Let’s reconsider Levan’s situation. His taxable income is 1250 GEL per month, equating to a monthly receipt of 1000 GEL. Annually, his taxable income amounts to 15,000 GEL:

1250 * 12 = 15000

15000 < 24000

Consequently, the state will contribute 25 GEL every month, representing 2 percent of his taxable income:

1250 * 0.02 = 25

Levan, as a self-employed individual, will need to deposit 4%, totaling 50 GEL:

1250 * 0.04 = 50

Thus, if his income after taxation was initially 1000 GEL, it will now decrease by 50 GEL:

1000 – 50 = 950 GEL

Example #4

Let’s examine Levan’s scenario further. His taxable income amounts to 3750 GEL per month, translating to a monthly receipt of 3000 GEL. Annually, his taxable income totals 45,000 GEL:

3750 * 12 = 45000

45000 > 24000

Consequently, the state will provide him with 37.5 GEL every month, representing 1 percent of his taxable income:

3750 * 0.01 = 37.5

Levan, as a self-employed individual, will need to contribute 4%, equating to 150 GEL:

3750 * 0.04 = 150

Thus, if his income after taxation was initially 3000 GEL, it will now decrease by 150 GEL:

3000 – 150 = 2850 GEL

The assets within the pension accounts are personal property, yet the right to dispose of them arises upon reaching retirement age. At that point, the individual can choose to withdraw the entire amount corresponding to the value of the asset in one lump sum or opt for regular withdrawals.

Furthermore, this amount can be utilized under other circumstances outlined by the law. These instances include permanent departure from Georgia or transferring funds to heirs in case of the participant’s demise.

Participation in the accumulated pension scheme remains optional. Employers do not receive financial assistance from this scheme, as they are required to contribute an additional 2%. They may also have to cover the employee’s 2% contribution to maintain current salary levels. Consequently, the law prohibits employers from influencing their employees in this regard.

Please note that this post is intended for general informational purposes only. For tailored advice concerning your business, it is advisable to seek guidance from professional legal experts.

For more detailed information, read the Law of Georgia on Accumulated Pension.