By AZE.US
Azerbaijan is changing its annual pension-indexation formula so that the full indexation rate will apply only to the portion of a pension up to the average monthly wage. The portion above that level will be adjusted using lower coefficients of 0.5 or 0.2.
The Milli Majlis passed the legislation in its third reading on October 16, according to Vesti Baku. The new provisions are scheduled to take effect on January 1, 2027.
Explanatory materials use an average monthly wage of 1,176.7 manats as of August 1, 2026. That figure is a reference point for the calculation, not a permanently fixed threshold.
How the Coefficients Work
Member of parliament Vugar Bayramov said the portion of a pension above the average-wage threshold would be multiplied by a coefficient of 0.5 for pensions below 5,000 manats and by 0.2 for pensions above 5,000 manats.
That means the relevant portion would receive one-half or one-fifth of the full indexation percentage. The pension itself is not being reduced; the change lowers the annual increase applied to the portion above the threshold.
For example, if the full indexation rate were 10%, a coefficient of 0.5 would produce a 5% increase on the amount above the threshold, while a coefficient of 0.2 would produce a 2% increase on that portion.
Illustrative Calculations
Using a 1,176.7-manat threshold, a hypothetical 10% indexation rate and the 0.5 coefficient, the calculations would be:
| Current Pension | Increase | New Pension |
|---|---|---|
| 500 manats | 50 manats | 550 manats |
| 1,000 manats | 100 manats | 1,100 manats |
| 1,500 manats | 133.84 manats | 1,633.84 manats |
| 2,000 manats | 158.84 manats | 2,158.84 manats |
For a pension of 1,500 manats, the first 1,176.7 manats would generate an increase of 117.67 manats. The remaining 323.3 manats would receive a 5% increase, adding 16.17 manats.
A full 10% adjustment on the entire 1,500-manat pension would add 150 manats. Under the differentiated formula, the increase would be 133.84 manats - 16.16 manats less.
These are illustrative calculations, not the announced indexation rate for 2027. The final amount will depend on the official indexation percentage, the average-wage figure used and the implementing rules.
More Than 90% of Pensioners Unaffected
Figures presented during discussion of the reform indicate that more than 90% of pensioners receive less than the average monthly wage. Their entire pension would continue to receive the full indexation percentage.
The new mechanism would apply only to the portion above the threshold for the remaining pensioners.
Sources: Vesti Baku; Milli Majlis; Korrekt.az.