Armenia’s mandatory funded pension system has expanded to more than 1.4 trillion drams in assets and close to one million participants, according to the Central Bank and the Central Depository, but economists warn that the system remains overly conservative, weakly competitive and only loosely connected to the real economy.
As of November 30, 2025, the Central Depository recorded 982,060 pension accounts and net pension assets of approximately 1.407 trillion drams. Central Bank data show that by September 30 the number of participants had reached 988,657, of whom about 450,000 were active contributors making regular social payments.
The Central Bank and the OECD have highlighted the system’s recent performance. In its “Pension Markets in Focus 2025” report, the OECD said Armenia posted strong investment returns in 2024 and continued asset growth.
Concentrated, conservative and weakly competitive
Despite its size, the system is heavily concentrated in conservative investment strategies. More than 99% of participants — and about 98% of assets — are held in conservative, low-risk funds, according to Central Bank data.
Two private companies manage the system — Amundi-ACBA Asset Management and C-Quadrat Ampega Asset Management Armenia — each offering fixed-income, conservative and balanced funds. If participants do not actively choose, they are assigned by default, a mechanism that tends to discourage engagement and risk diversification.
Economist Suren Parsyan says the structure of the market limits both competition and economic impact.
“After 11 years there are still only two fund managers operating in almost identical ways and delivering similar returns. There is no real competition,” Parsyan said. “Most of the money works under minimal risk conditions, which means the economy barely benefits, while the main beneficiaries are banks and the state, which can easily place government bonds.”
Pension funds are now the second-largest holders of financial assets in Armenia after banks, surpassing credit organizations and insurance companies.
Where the money goes — and why it matters
By law, at least 60% of pension assets must be invested domestically and in local currency, while up to 40% may be invested abroad.
In 2024, the largest share of pension fund assets was invested in government bonds, followed by foreign equity instruments, bank deposits and corporate bonds.
Corporate securities account for just 6.7% of total assets, reflecting a weak capital market and limited investment opportunities for long-term funds.
Approximately 66% of assets are invested in drams, largely in domestic government bonds and deposits.
Returns have fluctuated. Funds posted a negative return of -7.9% in 2022, before rebounding to 10.6% in 2024. The Central Bank forecasts returns of around 10.5% for 2025.
Supporters of the system argue it has helped stabilize Armenia’s financial sector, especially during periods of stress.
Former finance minister Vardan Aramyan said pension savings helped the government respond more quickly to the 2020 crisis and lowered borrowing costs.
“Without long-term savings, the state would have had to borrow at much higher rates,” Aramyan said. “These funds make credit cheaper for both the government and businesses.”
A safe system with limited long-term impact
Critics, however, argue that the current model risks reinforcing a system that is safe but economically shallow.
Since pension funds primarily invest in government bonds and bank deposits, they say, the system generates stability but only limited development, while the state effectively borrows back money it first collected through social contributions — now at a higher cost and with private intermediaries earning fees.
With the capital market underdeveloped and domestic companies largely absent from securities markets, economists warn that Armenia’s rapidly growing pension savings may remain trapped in low-risk, low-impact instruments, raising questions about whether the system can become a meaningful driver of long-term economic growth.
This article was originally created in Armenian by Gevorg Avchyan
Chart by Karine Darbinyan
The English summary was created by AI based on the original article in Armenian.
The material was produced by Ampop Media in cooperation with the Friedrich Ebert Stiftung (FES). The views and opinions expressed in this publication are those of the author(s) and do not necessarily reflect those of the Friedrich Ebert Stiftung.
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First Published: 27/12/2025
