In the second quarter of this year, cumulative retirement account reports revealed that the retirement account balance decreased, not increased, because the fund’s return was negative. The guest of Aravot’s “Areresum (Confrontation)” program, Deputy Chairman of the Central Bank Nerses Yeritsyan, answering the question that since the state has forced citizens to join the cumulative pension system, is it obliged to take steps now when citizens are suffering, said, “The state has taken steps, and it has set a certain appetite for risks that the managers must follow. And they are strategic, they are long-term… Managers are not allowed to speculate.”
According to him, “This temporary negative yield will bring us much bigger incomes in the future, because whenever the price of the share has dropped, we buy much more shares for the money we pay to the accounts with AMD. When interest rates start to fall again, the assets bought at that low price will appreciate and we will have a much higher return together with our existing portfolios.”
“Suspension” civil movement coordinator, businessman Samson Grigoryan noted, “You should always worry about the loss of money, it would be short-term if it was a quarter and that’s it, but the trend over the last year is that there is more loss than income. Only in the quarter that came in December of last year there was a plus, but the whole year was a minus, and it is really a cause for concern and the relevant bodies are obliged to worry.”
Another guest of the “Areresum” program, member of the board of the “International Center for Human Development” NGO, economist Ashot Khurshudyan said in this regard, “I hope Mr. Samson plans his business long-term, not for a year, because even 2 years is short-term, and not a quarter in a 30-40-year horizon… There is a simple economic phenomenon: recovery, financial cycles always rise after falling.” In response to the question about what grounds he has to assure that it will rise if the reasons for the decrease have not disappeared: the Russian-Ukrainian war, the share prices of various companies are falling, etc., he answered, “Three factors coincided, that’s why there was a big fall. First, there is the increase of interest rates both in Armenia and throughout the world. And the third is the appreciation of AMD.
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People see a large number in their accounts and worry, the minus is large. Before, their accumulations were small and they did not notice them. But there have always been fluctuations. And now, in any fluctuation, they will see a greater absolute number, both the benefit and the loss, because the money already accumulated, the share, is much larger than the amount that we accumulate every month… In the report, they add up the fluctuation of the share, the value, and your investment, and show you the difference with a minus – you feel like you lost, whatever went minus.
In fact, you accumulated so much, you bought a share at that price, which you can also sell. Well, the first real victims at this point are those who, having a balanced or conservative savings plan, ran and switched all at once… They suffered because they sold the shares very cheaply now and bought another instrument that will bring less interest in the future.”
Isabella Adilkhanyan, chief financial and operational director of “C-Quadrat Ampega Asset Management Armenia” LLC, specifically mentioned the strict monetary policy of the Central Bank as the reason for the negative result. “Interest rates go up and that’s usually inversely proportional to bond prices. All these have affected the negative returns of the funds.”
In this regard, the vice president of the Central Bank said that inflation is high and the Central Bank has responded with an interest rate. “Inflation will return to its target and we will start reducing interest rates. That’s why we say it’s temporary.” He assured again that after the reduction of interest rates, “we will have all the benefits I explained at once.”
According to Nerses Yeritsyan, this income has not been lost anywhere. The calculated losses are being recovered, and we receive income every month. “Tomorrow it may decrease again, but it does not bother me, because I will need that money when I retire.” The vice president of the Central Bank emphasized, “The money given by us and the state has not decreased. We give the statement quarterly. But when you take the entire backlog from 2014, the state’s backlog has not decreased. For some people, up to 30-40 percent of the accumulated income may have decreased, but 60 percent is still in the accounts. And the second condition is met, and if the legal requirement regarding the guarantee were to work today (according to Article 49 of the RA Law on Cumulative Pensions, the returnability of the entire amount of mandatory cumulative payments made by the participants, adjusted by annual inflation, is guaranteed. – A. I.) our funds have more accumulated income than inflation. In other words, we could receive a pension for the amount we saved and our income, which was higher than inflation. There was more than 90 percent income; that is, we had 10 percent annual income, but we lost one year’s income. But the principal amount has not decreased.”
According to the CB vice-president, the accumulated pension system is established and transparent. “And we learn to live in a market economy where fluctuations are opportunities.”
Anna ISRAELYAN
