Real Pension Amounts Have Not Actually Increased: 'Fact'

The newspaper 'Fact' reports that one of the most sensitive areas of the social security system in Armenia, the pension sector, has been undergoing a deep stagnation process in recent years, as authorities have attempted to soften public discontent with various technical and superficial initiatives instead of implementing real pension reforms.

The actual amount of pensions has not been increased for years, resulting in pensioners' incomes being inadequate not only for meeting minimum living standards but also for coping with inflation and changes in the socio-economic environment.

In this context, the authorities, having refrained from a universal pension increase, have begun to promote a so-called 'cashback' system, which is presented as a modern and innovative alternative for increasing pensions.

The essence of the cashback system is that pensioners and beneficiaries, by making their cashless payments at specific locations, mainly supermarkets or other service points, can receive a certain percentage back from their expenditures. Initially, the cashback rate was set at 10%, allowing a maximum of up to 5000 drams monthly, which was later raised to 12%, resulting in a maximum cashback of 6000 drams. The latest government decision is to increase this threshold to 20% starting in 2026.

Officials responsible for the social sector even emphasize that, for example, pensioners receiving 50,000 drams can potentially increase their pensions to 60,000 drams as a result of the cashback.

This initiative is portrayed by the authorities as an effective social measure, suggesting that it could somewhat raise pensioners' incomes without placing significant burdens on the state budget. However, a thorough analysis of this system reveals numerous structural, social, and value-based issues that not only fail to address pensioners' real needs but also exacerbate social inequality and merely serve as window-dressing for state obligations.

First and foremost, the cashback system cannot fundamentally replace universal pension increases. A significant portion of pensioners, due to age, health issues, or lack of digital skills, simply cannot fully utilize banking, mobile, or cashless payment systems.

For many, monitoring accounts through mobile banking and conducting online transactions is not only technically complicated but also psychologically unacceptable. Especially in rural areas, where ATMs and payment terminals are scarce and digital literacy is low, pensioners withdraw their pensions in cash and mainly shop at markets, small stores, or from neighboring vendors where cashless payments are not an option.

Another important issue is that even pensioners capable of using cashless payment systems often do not perceive its real benefits. In Armenia's market conditions, essential consumer goods and services are generally more expensive in supermarkets where the cashback system is operational compared to goods bought at markets or through street vendors. Many pensioners who strive to make ends meet prefer to save every dram and shop where it is more affordable, not where they can potentially receive a percentage back. This means they are forced to make purchases in cash.

Moreover, only a small portion of the pensioners' income is spent on shopping, as a significant part goes toward loans, utilities, and other obligations, where the cashback mechanism does not apply.

Another hidden issue of the cashback system is that the state does not genuinely increase the incomes of all pensioners, but only those who can use the system to its maximum potential, which often does not exceed 2,000-3,000 drams. Thus, the authorities can formally present the situation as if pensioners are receiving additional income, while in reality, public expenses are limited, and general social fairness is not ensured.

This becomes particularly evident when analyzing the structure of budgetary expenditures. Salaries of high-ranking officials, bonuses, travel expenses, and financing for other sectors of public administration have significantly increased in recent years without the limitations or savings imposed on cashback, while additional technical and procedural obstacles are created for pensioners with every dram they receive.

The cashback system is often justified by the need to combat the shadow economy, generate taxes, and promote cashless payments. However, the authorities’ justifications in this regard are also brought under scrutiny. It is almost inconceivable that pensioners with extremely low incomes can make purchases of such volume that would significantly impact the scale of shadow circulation.

Moreover, the shadow economy is primarily based on unregistered circulations in sectors such as large-scale trade, construction, and production, whereas cashless purchases by pensioners could at best only affect bookkeeping in small shops. In sectors where the shadow economy truly flourishes, the government neither tightens control nor, in some cases, overlooks unregistered incomes of larger players.

Amid all this, the pension cashback system has turned into a manipulative tool of social policy through which authorities attempt to create the illusion of pension reforms for the public while actually shying away from their primary responsibilities of ensuring a dignified pension. Today, thousands of pensioners are forced to settle for the minimum, often deprived of the opportunity to secure basic necessities, pay for medications, utilities, or medical care. The pension supposedly 'increased' by 3,000 to 3,500 drams is not only insignificant compared to inflation and actual needs, but also often inaccessible due to systemic complexities and social injustice.

In contrast, Prime Minister Pashinyan has decided to increase the salaries of officials at the expense of pensioners. He claims that a decision has already been made to re-evaluate state salaries but is not being announced publicly for fear that '97 percent of the active public in Armenia will direct all their insults towards the government.' How timid they are...

For further details, refer to the original source.