AZE.US
Azerbaijan is considering a change that would reduce the share of mandatory social-insurance contributions credited to workers’ individual pension accounts from 90% to 85%.
The proposal is part of amendments to the law “On Labor Pensions” that were approved by the Milli Majlis in the first reading. Parliament said the broader package is intended to increase the social-insurance reserve, strengthen long-term financing and support vulnerable groups.
The proposed change was discussed in a Baku TV report. Economist Rashad Hasanov said the effects would become more visible over time and could weaken public confidence in the pension system.
A Milli Majlis report confirms that lawmakers are considering measures to increase the social-insurance reserve and revise pension-capital mechanisms.
What the Change Means in Manats
If a worker’s total monthly social-insurance contribution is 200 manats, the amount recorded in the individual pension account would be:
- 180 manats under the current 90% rule;
- 170 manats under the proposed 85% rule.
The difference is 10 manats a month, or 120 manats a year. Over 10 years, with contributions unchanged, that would amount to 1,200 manats less in newly recorded pension capital before indexation.
The allocation would fall by five percentage points, while new deposits into an individual account would decline by about 5.6% compared with the current level.
That does not mean every future pension would automatically fall by 5.6%. The final effect would depend on pension capital already accumulated, the worker’s remaining years of employment, indexation and the final terms of the legislation.
Hasanov proposed varying the credited share by income level, with different rules for workers earning below the average salary, between one and three average salaries, and above that level.
The Baku TV report also said the proposed amendments would raise the share of mandatory contributions used for system-management expenses from 2.5% to 3%.
The central question for workers is how the larger collective reserve would be balanced against slower growth in their individual pension capital. If total contributions remain unchanged, moving from 90% to 85% means less money will be recorded in each personal account.
AZE.US