Question 50. What role can an individual have in managing his funded pension assets?

An individual himself may select the mandatory funded pension fund and the fund manager who will manage his funded pension savings. The individual may switch to another mandatory funded pension fund and the fund manager, as well as invest his assets concurrently in several mandatory funded pension funds. For example, he may leave his previously accumulated funds in the mandatory funded pension fund and hand over the future savings to management by another fund manager. 

A participant is free to switch to another pension fund at his discretion by selecting another fund operated by the same manager or any other fund of other managers. Change of the fund or the fund manager once a year is free of charge while switching of the fund or the fund manager more than once during the same year, may be charged a fee for redemption of shares by the manager. 

The freedom of choice will lead to healthy competition and contribute to an increased responsibility by fund managers. 

When an individual makes his choice at the initial stage, he is recommended to obtain the necessary information about the existing fund managers and supervisors (from websites, published booklets) and then to find out the service fees since they may significantly vary from fund to fund, as well as get to know the rules of the mandatory funded pension operation. 

The key criterion for selecting a pension fund is the return generated as a result of managing pension assets, and each fund manager is required to regularly disclose the information on the earned income. 

Question 51. Who and how will manage funded pension savings?

Funded pension savings will be managed by pension fund managers. Subsequently, apart from paid funded contributions participants will receive additional income on invested pension assets. 
Pension fund managers are paid for their fund management services. The remuneration for management services is set out by the rules of each fund and cannot exceed the amount defined by the Law, i.e. 1.5 % of the value of assets under management. 

Entities with a status of a joint-stock company or a Limited Liability Company which have been issued a pension fund management license by the RA Central Bank may act as pension fund managers.

Question 52. What is Diversification?

Diversification means reducing the investment risk by concurrently investing in a variety of assets. The investment risk is too high if you invest all the pension funds in the stocks of only one company as the assets value may go down for even 30%. It is still less likely that the stocks of 30 different companies may go down at the same time. Moreover, if the assets are selected from a variety of industries, company sizes and types, the portfolio risk, constituent of their assets, would be even less. 

Further diversification effectiveness may be gained by investing in companies of other countries or in different types of assets such as bonds, stocks, bank deposits and so on. 
Diversification may result in the minimization of the portfolio risk since decrease in the value of an asset can be compensated by increase of another asset in the portfolio. The overall portfolio yield will be lower than that of the most profitable asset inside the portfolio, nevertheless the portfolio risk will be lower in comparison with the one of the most risky asset in the portfolio. 

Question 53. From what sources can an individual obtain information about pension fund managers?

An individual may obtain comprehensive information about pension fund managers from the webpage operated by each manager which must contain the following information on the fund manager and his managed pension funds: 
• At least the recent annual and quarterly financial statements; 
• Audit options about the annual statements; 
• Information about the composition and structure of pension fund assets; 
• Information on the return of the pension funds; 
• Information about decisions on paying out dividends; 
• Information about people with significant participation in the manager’s paid-in capital; 
• Information about the directors of the manager. 

The information available on the fund managers’ websites is verified and monitored by the RA Central Bank in order to assure no dissemination of inaccurate and disorienting information. 

Question 54. What are the criteria and the procedure for selecting pension fund managers by the Central Bank?

The criteria and the procedures for selecting pension fund managers are defined by the RA Law “On Investment Funds”, according to the Rules of Procedure 10/01, set forth by the Decision № 116-N made on 2 May, 2011 by the RA Central Bank Board. 
In particular, permission to the pension fund management will be given to the manager operating on the territory of the RA which owns an international financial organization or at least one member (shareholder) having a status of a foreign authoritative organization, specialized in the pension funds (or other similar investment funds) management. The participation of such an international financial organization and/or a foreign authoritative organization (organizations) with voting right should comprise more than 50 %, and that organization (organizations) must have a decisive vote in defining the pension fund management strategy, as well as in the formation of manager’s executive body and the inner supervision system. Moreover, on assessing whether or not the above-mentioned foreign organization is authoritative, the RA Central Bank takes into account the following circumstances: 

1. the rating granted by the authoritative international rating agencies; 
2. being involved in the list of top managers published by the consultative institutions or (and) analytical organizations renowned in the financial world; 
3. the size of assets under management; 
4. the yield of the managed funds; 
5. the present ability level in different countries of the world; 
6. the organization shares being registered by the authorized body supervising the capital market of the Organization for Economic Cooperation and Development or the member states of the European Union and being permitted to trade on in the regulated markets; 
7. experience in managing pension funds or other similar funds (according to the investment policy); 
8. other significant circumstances. 

Question 55. Which pension fund managers have been issued licenses by the RA Central Bank?

In Armenia the Management of the Mandatory Funded Pension Assets is granted to 2 organizations; “Amundi-ACBA Asset Management” CJSC and “C-Quadrat Ampega Asset Management Armenia” Ltd.. Each of the managers offers three types of pension funds; fixed-income, conservative and balanced. 

Question 56. What will happen if a funded pillar participant doesn’t select a pension fund or a fund manager?

If a participant has only selected a pension fund manager the targeted social contributions made in favor of him are invested in the conservative fund of the chosen fund manager. 

In case a participant makes no choice at all, a pension account is opened for him by the Registrar of Participants, based on the personal information on targeted social contributions provided by the Tax Body. The Registrar of Participants will randomly (through software module) select a pension fund instead of the participant who hasn’t made a choice within 30 days after his pension account has been opened. 

Within the following 10 working days the Registrar of Participants informs the participant about choosing a pension fund and a fund manager for him in written (paper) form. Later on, the participant may switch to another pension fund if he wants to. 

Question 57. How to select a fund manager?



A participant may select his pension fund and the fund manager in two ways: 

1. At the page “My Account” on the website www.epension.am. He/ she will need an identification card, an identification card reader and an activated electronic signature; 
2. At the Account Operators’ Offices, presenting a Passport, a Public Services Identification Number or a certificate on its unavailability, or an identification card only. 

Question 58. Who can act as an Account Operator?

Banks, investment companies, the national operator of postal communication (Haypost Ltd.) operating in the Republic of Armenia may act as Account Operators. According to the agreement signed with the Registry of Participants, currently the following companies perform the functions of Account Operators; 

“ARARTBANK” OJSC; 
“ARDSHININVESTBANK” CJSC; 
“HSBC BANK ARMENIA” CJSC; 
“ARMBUSINESS BANK” CJSC; 
“HAYPOST” CJSC; 
“VTB BANK ARMENIA” CJSC; 
“INECOBANK” CJSC; 
“CONVERSE BANK” CJSC; 

Question 59. Is it possible to switch to another pension fund or a fund manager?

A participant may switch to another pension fund or a fund manager at any moment by investing his future targeted social contributions in that fund. 
Participants cannot change their pension fund and the fund manager during the year 2014. 
Starting from 2015, change of the fund or the fund manager once a year is free of charge while switching of the fund or the fund manager more than once during the same year, may be charged a fee (it cannot exceed the costs of the amount transfer). 

Switching from one fund to another operated by the same fund manager is free of charge and with no limitations. 

Question 60. When and how can a participant change the fund manager already chosen by the Registrar of Participants?

Participants cannot change the mandatory funded pension fund and the fund manager selected by the Registrar of Participants during the year 2014. 
Starting from 2015, change of the fund or the fund manager once a year is free of charge while switching of the fund or the fund manager more than once during the same year, may be charged a fee (it cannot exceed the costs of the amount transfer). 

Here are the two possible ways: 

1. At the page “My Account” on the website www.epension.am. He/she will need an identification card, an identification card reader and an activated electronic signature; 
2. At “ARARTBANK” OJSC; “ARDSHININVESTBANK” CJSC; “HSBC BANK ARMENIA” CJSC; “ARMBUSINESS BANK” CJSC; “HAYPOST” CJSC; “VTB BANK ARMENIA” CJSC; which currently have a status of Account Operators. 

One should have with him a Passport, a Public Services Identification Number or a certificate on its unavailability, or an identification card only in order to switch to another pension fund or a fund manager.   

Question 61. Can an individual’s targeted social contributions be concurrently invested in funds of different managers or in two different funds operated by the same manager?

An individual cannot invest his targeted social contributions concurrently in 2 different pension funds; i.e. he is not allowed to invest part of the monthly contribution in one fund and the rest in another. 

But, a participant may switch to a new pension fund, transferring his previously accumulated funds into the new one. He may also invest in this new fund his future contributions only. 

Question 62. What is the management fee for each Pension Fund?

Following the rules of his managed pension fund, each manager defines the annual management fee for that pension fund and its calculation form. 

Pursuant to Article 47 of the RA Law “On Funded Pensions”, the Mandatory Funded Pension Fund Management fee should not exceed 1.5% of NAV of that very fund. 
At present the managers who have been issued licenses by the RA Central Bank set the following fees: 

“AMUNDI-ACBA Asset Management Armenia” CJSC: 

The management fee for the AMUNDI-ACBA Fixed Income Fund (abbreviation in the system- AMFIX) is 1% from NAV of the Fund. 

The management fee for the AMUNDI-ACBA Conservative Pension Fund (abbreviation in the system- AMCON) is 1.1% from NAV of the Fund. 

The management fee for the AMUNDI-ACBA Balanced Pension Fund (abbreviation in the system-AMBAL) is 1.3% from NAV of the Fund. 

“C-QUADRAT Ampega Asset Management Armenia” Ltd.: 

The management fee for the C-QUADRAT Ampega Fixed Income Fund (abbreviation in the system- CQFIX) is 1% from NAV of the Fund. 

The management fee for the C-QUADRAT Ampega Conservative Pension Fund (abbreviation in the system- CQCON) is 1.1% from NAV of the Fund. 

The management fee for the C-QUADRAT Ampega Balanced Pension Fund (abbreviation in the system- CQBAL) is 1.3% from NAV of the Fund. 

Question 63. Who monitors Pension Fund Managers’ and Custodians’ activities?

A Pension Fund Manager’s and a Custodian’s activities are regulated and controlled by the RA Central Bank. 

A Pension Fund Manager is required to publish the company’s financial statements and the Auditor’s report as well as let them appear on his website. 

Question 64. What’s the possibility of a change of the assets’ managers?

Of course, assets’ managers may change, their number may rise or fall as the Law does not define a minimum or a maximum number of assets’ managers. In terms of fair competition, of course, it is advisable that there be at least 2 assets’ managers. 
The entry of a new assets’ manager into the market may be done in the same procedure after issuing him a license by the RA Central Bank.  
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