A lot has been said abut the cardinal changes in to the pension system in Azerbaijan and the next year promises to be a breaking one. As the pension provision is an actual them for current pensioners, but also for the employed portion of population, the article tries to disclose the major milestones concerning the social security of Azerbaijani citizens for 2005.
Let’s begin from 2006 SSFS budget
Namely the document lays the financial basis of all changes in the pension system. After the recent approval at the parliament last week as the law the document has become a topic of discussion of MPs and the society. According to the head of the State Social Security Fund (SSFS), Salim Muslimov, incomes and revenues of non-deficit budget of the SSFS are forecasted at 567.6m of denominated manats, or 12.7% more than 2005. After the injection of some changes in the draft law in connection with the planned rise of salaries in some organizations of the country the non-deficit was adopted in the amount of 568,241,5m �new’ manats. Besides, next year the pension social insurance system will isolated from the social aid next year, while the pensions of social pensioners will be equaled to social benefits and the Ministry of Labor and Social Security will be involved in the payment.
Next year collection of payment in the obligatory social insurance, which is to comprise the dominating 70.4% of the aggregate incomes of the budget of SSFS (63.1% - in 2005), or 400,47m вЂ�new’ manats will remain unchanged as major source of incomes of the Fund. According to the SSFS specialists’ forecasts, remittances by the private enterprises and organizations will comprise 247.8m manats, state enterprises вЂ" 152.6m new manats. Muslimov predicts that 1.2% rise in transfers from the obligatory state insurance over a growth of average monthly salary in 2006.
The second article of SSFS budget funds вЂ" the transfers from the public budget вЂ" will amount to 29.4% (36.9% - in 2005), or 167m manats. As compared to 2006 the pubic budget burden will decrease 16m manats.
The incomes of the SSFS from different sources (0.1%) which came from the price of sanitary-resort tour will remain the previous amount вЂ" 0.5m manats.
Now about amount of the pension
The pension will rise next year. The average pension rate will comprise 210,000 manats, 42 �new’ manats. The system of calculation will also be changed. The basic pension rate next will be set at 125,000 �old’, 30 �new’ manats.
In 2002-2005, pension rates in Azerbaijan will increase 63.8%. In 2006 average nominal pension rates will be increased to 26.3% of the average monthly nominal salary. In 2004 the figure will be equal to 25.7%, while in 2005 it is expected to attain 24%.
As to insurance cards…
it is no less important moment in the pension reforms system in Azerbaijan. As a result of transition to the individual registration of population in the sate pension security system every employed will be issued an identification number.
The application of the personal registration targets prevention of concealment of ices at the enterprises and organizations of the country, personal interests of the employee in payment of social fees and in general the survival of the pension payment system. In compliance with the new concept on pension reforms, a man can have several job simultaneously and pay insurance fees on each of them.
All to occur within the law
The above said innovations expected to occur in the pension system of Azerbaijan will be undoubtedly resolved within the frames of the laws on Social Insurance and on Labor Pension. A bill on changes and supplements to the Law on Social Insurance has been submitted to the consideration of the parliament. In general, it is planned to inject over 30 changes in the legislation directed at the improvement of administration and management in the social sector.
Firstly, in accordance with the changes, the foreign citizens will start payment of insurance fees in Azerbaijan, which will ensure additional 25bn old manats for the Fund. Such step will resume fare rivalry between the enterprises and foreign and local personnel. So, the expenses for the social insurance payments are included in the direct price of goods and services. As a result the local companies have an additional financial burden. The same time the correlation between the employees and pensioners in favor of the first, rather the latest.
Secondly, a process of collection of obligatory insurance payments from the physical entities, as well as distribution of pensions for working pensioners, which will be given to the disposal of the SFSS will also undergo definite changes. In accordance with the innovation, the working pensioners will receive payments indirectly from the SSFS through plastic cards or local branches of the SSFS, but not in the job places as it has been implemented thus far.
The changes will also concern the privileges. The amount of social insurance payments are defined by the law, while different social privileges at the decision of the Cabinet of Ministers. At the proposal of the SSFS, both categories should be determined in the legislative order. It will mainly concern the enterprises and organizations of the country, involved in the entrepreneur activities. A new social insurance payment system will applied for them, which stipulate the transfer of obligatory social fees on the base of indices determined in the legislative order, rather on the base of currently existing figure вЂ"average monthly wage, which the State Statistics Committee calculated. Thus, the entrepreneurs involved in the sphere of construction, transport and trade, will pay social fees per employee in the amount of 70% of the wage fund, while the representatives of other sectors - 40%.
The application of the personal registration system of citizens from January 2006 was also included in the draft law on Labor Pension. Next year it is not planned to cut the social insurance rate.
In 2006 the SSFS accounts to on the establishment of non-governmental pension funds Muslimov says that in August 2005 the SSFS worked and submitted to the President’s Administration a draft law on legislation of activities of the nongovernmental pension funds. It will enable to release considerable part of responsibility for pension provision of citizens, decrease the budget burden, and give birth to formation of vacant capital in economy, which could be used for investing.
To strengthen the control
The Ministry of Finances comes out with support to institutionalization while carrying out the pension reforms. It proposed the establishment of the state commission on reforming the pension system. According to Minister Alekperov, the commission is intended to regulate the issues of establishment of non-governmental pension funds, resolve the problems of obligatory of social insurance. The key task of the society is to demand the transparency of the ongoing processes in the sphere of pension provision, use of the budget expenses of the SFSS and promote the expedient use of each denominated manat included in it.