The establishment of non-state (private) pension funds is expected in Azerbaijan. Currently, the process of developing a draft law related to this is underway. According to the Ministry of Labor and Social Protection of Population, more than 20 draft normative legal acts are being prepared for the establishment of these funds.
In a statement to Modern.az, Vugar Bayramov, a member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, noted that work on the establishment of private pension funds is continuing intensively.
“Especially considering that, on the one hand, work is being done to improve legislation in this area, and on the other hand, the development of a new mechanism is also one of the main directions in the formation of private pension funds.”
According to the MP, the formation of the legislative framework in the aforementioned context is of great importance, first and foremost:
“In the Milli Majlis Committee on Labor and Social Policy, this issue – namely, the formation and improvement of legislation related to private pension funds – is one of the main issues under discussion. In this regard, it is expected that the preparation and submission of projects will be possible in the near future, and these projects will be brought up for discussion in the Milli Majlis.”
The deputy also emphasized that private pension funds will create an alternative and parallel choice for citizens:
“This system will allow citizens to accumulate individual capital in private pension funds by making monthly payments and to receive additional income from a private pension fund, alongside their state pension, during their retirement period. This will naturally lead to an increase in the pension amount.
Furthermore, there will be an opportunity to use a certain portion of the funds accumulated in private pension funds earlier. It is precisely from this perspective that private pension funds are more attractive.”
According to V. Bayramov, the expectation is that it may be possible to prepare and agree upon legislative drafts by the end of this year:
“This means that we may observe the discussion of these drafts in the Milli Majlis from the end of this year and starting next year.”
He also noted that private pension funds are of significant importance for citizens in terms of providing a parallel savings opportunity:
“For example, if a citizen receives a 600 manat pension from the state pension fund, they can also receive an additional 300 manat through their savings in a private pension fund. As a result, their total pension could increase from 600 manat to up to 900 manat. This is considered a significant advantage in terms of increasing a citizen's income.”
The deputy noted that, on the other hand, as is the case in international practice, it is possible to use a certain portion of the capital accumulated in private pension funds even before reaching retirement age:
“For example, if a citizen has 60,000 manat accumulated in the fund, they can use one-third of it at the age of 50-55 for loan repayment, covering certain expenses, and other needs.”
Our interviewee also noted that private pension funds will act as a more flexible mechanism:
“These funds not only allow citizens to form additional capital but also provide an opportunity to use these funds at an earlier stage. Thus, citizens' pension provision is strengthened, and financial stability is increased,” V. Bayramov concluded.
