The establishment of non-state (private) pension funds is expected in Azerbaijan. The process of drafting a law on this matter is underway. The Ministry of Labor and Social Protection of Population announced that more than 20 draft normative legal acts are being prepared for the creation of these funds.
Member of the Milli Majlis Vugar Bayramov told Modern.az that the work done regarding the establishment of private pension funds has intensified considerably:
“Initially, legislation will be created in this direction. On the other hand, the development of new mechanisms related to this and their coordination with private pension funds is one of the main directions. Naturally, the formation of the legislative base is very important. This is a seriously discussed topic in the Labor and Social Policy Committee of the Milli Majlis.
The preparation, submission, and discussion of projects in this direction will be possible.”
The deputy noted that the creation of parallel choice opportunities for citizens by pension funds is a key advantage:
“By making monthly payments, citizens can accumulate capital in a private pension fund and receive pensions from two sources during their retirement period.
For example, if our citizen receives a pension of 600 manats from the state pension fund at retirement age, they can receive an additional 300 manats as a result of contributions to a private pension fund.”
V. Bayramov noted that it will also be possible to use the capital in the private fund earlier:
“This also exists in international practice. If a base of 60,000 manats has been formed in the private part, 20,000 manats of it can be used earlier – from the age of 50-55.
From this perspective, an alternative fund is more flexible and creates more opportunities for citizens who accumulate capital in those funds.”
Economist Eyyub Karimli stated that private pension funds are an area that positively affects the pension process:
“This can affect the calculation and increase of additional interest on pensioners' pensions in the future. On the other hand, every citizen has the right to keep their pension in the fund they desire, which creates competition.”
The economist noted that if there are several funds in the future, people can cooperate with a better-managed fund, which expands competitive opportunities:
“On the other hand, dependence on the state for pension increases will decrease, and certain opportunities in the management of pension capital will also expand in the future.
If legislation allows, a private pension fund can also apply pensions to other forms of retirement – pensions due to loss of the head of the family and disability pensions.”
E. Karimli emphasized that certain risks also exist in this endeavor:
“What do the risks consist of? Firstly, it is necessary to fully ensure the public's trust in these funds. As you know, some banks operating in our country have been closed down in certain years. Therefore, I believe that the activities of these funds should be strictly controlled by the state, and the accumulated funds should be insured by the state.”
The abundance of funds will have a positive impact on the country's economy, economic environment, and financial environment, the economist added.
