OMM Redaksiyası
A proposal to reduce the share of compulsory state social insurance contributions from salaries that is credited to individual accounts in Azerbaijan could affect the pension capital workers accumulate and the amount of their future pensions if adopted.
According to Operative Information Center-OMM, economist Ali Ahmadov said the reduction in funds credited to individual accounts could also be reflected in future pension benefits.
How could the pension of someone earning 1,200 manats change?
Under the current rules, a person earning a gross salary of 1,200 manats pays 300 manats in social insurance contributions to the State Social Protection Fund. Of that amount, 270 manats is credited to the person’s individual account, while the remaining 30 manats goes toward benefits for current pensioners, the expert said.
Based on the current calculation method, the future pension of a person who works for 25 years could amount to about 562 manats, Ahmadov explained.
Under the proposed change, the share of the 300-manat social insurance contribution credited to the individual account would fall from 270 manats to 255 manats. The amount directed toward paying current pensions would consequently rise from 30 manats to 45 manats.
In the expert’s example, the change would reduce the future pension from 562 manats to 531 manats.
What is the purpose of the change?
Ahmadov believes the main aim could be to maintain the financial sustainability of the State Social Protection Fund.
He said the fund’s financial burden grows when the number of workers does not increase at the same pace as the number of pensioners, and as pension payments rise. Allocating part of the funds credited to individual accounts to current pension payments could be intended to help meet this burden.
The information provided says the changes are planned to take effect next year. However, the share of contributions to be credited to individual accounts and the final terms of the changes must be confirmed against the approved legislative text. (Khazar Khabar)
