Pension reforms in Azerbaijan are held more obviously in Azerbaijan. Now you cannot surprise anyone with the old using their cards for receiving pension from the cash vending machishnes.
According to the State Social Protection Fund of Azerbaijan (SSFS), as of 5 October 780.000 of the 1,082,000 labor pensioners, including 225.000 pensioners or 43% in the rural districts, received their pensions via cards. Some 223 ATM, including 29 ATM in the cities, have been installed to serve them. According to the plans of the Fund, from 1 January 2008, the military pensioners will also receive their pensions via cards. The service of the pension cards is provided by the National Bank of Azerbaijan and Kapital Bank.
According to the pensioners, receiving their pensions from ATM via cards is more comfortable for them. According to the information by the Fund, as of 1 September 2007, the average amount of the pensions in Azerbaijan totals AZN 58.1 ($68.2), which makes up 34.1% of the monthly average salary in the Country. As of beginning of October, the average labor pension in Azerbaijan amounted to AZN 65.7.
| Average amount of monthly pension, AZN | In relevant to monthly average salary, % | |
| I quarter of 2006 | 30,8 | 23,7 |
| I half year of 2006 | 36,0 | 26,6 |
| 2006 | 41,1 | 27,6 |
| I quarter of 2007 | 57,69 | 35,2 |
| I half year 2007 | 58,14 | 34,1 |
The State Social Security Fund of Azerbaijan, Salim Muslimov, said last week that currently the average amount of the pension is growing more rapidly than the amount of the salaries in Azerbaijan. Over the period of 2000-2007 the amount of the average monthly salary in Azerbaijan increased by 3.8 times and made up AZN 170.1 while the average amount of the pension during this period grew by more than four times.
According to Muslimov, the indicator of the pensions in relevant to the amount of the salaries in Azerbaijan is the best in the CIS countries, excluding Belarus (44.1%) and Ukraine (40%). This figure in Armenia makes up 18.1% and in Georgia - 16.7%.
The amount of the pensions in relevant to the amount of the salaries in Russia equaled 25.6%. However, from 1 October all kinds of the pensions increased in Russia. The base part of the labor pension in Russia increased by 147 rubles 28 kopecks and made up 1260 rubles (1 ruble - AZN 0.0341).
The pensions will also be increased in Azerbaijan: in 2008 the base and insurance parts of pensions will be increased. Firstly the base part of the pension will be increased in order to bring the amount of the minimal pension to the defined cost of living. The proposals of the Azerbaijan State Social Protection Fund have been devised and submitted to the Cabinet of Ministers, approved by the President of the Country and presented for discussions in the Parliament. According to the official data, the cost of living in 2008 will amount to nearly AZN 80-90 and accordingly the minimal salaries and pensions may be increased up to AZN 70. by 2010 the minimal amount of the pension will be equal to the cost of living. Currently the cost of living amounts to AZN 64 and the base pension - AZN 50.
In addition, Muslimov provided details about the changes which will come into force from 1 January 2008 if the amendments will be adopted to the Law on Pension and on account of pensions of citizens who retired on pension by 1 January 2006. Thus, according to the decision of the President, the social unfairness towards this category of population, whose pensions is accounted with the maximal salary (AZN 51), will be liquidated. In addition, the pensions for the martyr's families will be increased from AZN 80 to AZN 85 per months.
Ensuring the true account and rapid repartition of the pension was made possible through establishing individual accounts on State social insurance. According to the information by the Fund, as of 1 October 1,404,600 workers passed through social individual account, an increase of 180.000 workers as compared to the beginning of the year. In addition, 1,116 workers of legal entities, 67,600 citizens employed by the individual enterprises and 221,000 land owners have passed through the individual account. It means that as of 1 October, 82.6% of the insurers of the individual account have new electronic pension dossier.
Generally 1.7mln payers of the social insurance fees have been registered in Azerbaijan currently. According to the data by the Fund, up to now, it was possible to attract 5127 employees of 28 out of the 71 construction companies functioning in Azerbaijan to the social insurance. As regards to the number of the foreign employees, as of 1 October the number of the foreign citizens registered in the system of the obligatory social insurance made up 4437 people and most of them are Turkish citizens (2683 человек). Generally citizens of 70 countries have been involved in the economy of Azerbaijan. The subcontractor organizations transferred AZN 22mln to the Fund.
Existence of such amount of the finances in the budget of the Fund led to the surpluses in amount of AZN 54.5mln ($64.042mln) as of 1 October. Taking into consideration the remains from the last year and payment of the debts, the Fund's profits overt the recent three quarters made up AZN 777.6mln and expenditures - AZN 723.1mln.
The net profits in 2007 amounted to AZN 739.5mln or 100.4% of the forecasts and expenditures - 99.2% of the forecasts. AZN 499.2mln have been received for the social insurance payment, including AZN 191.9 (88.4% of the forecasts) from the State organization and AZN 307.3mln (113.21%) from non-State organizations. Since the beginning of 2007, the State Social Security Fund of Azerbaijan has paid AZN 675mln in labor pensions. It means almost a doubled increase in the amount of payment as compared to last year or an increase by AZN 308mln.
The Fund is planning to submit the project of the state program on development of the pension system for 2008-2013. The State Program envisages applying the system of accumulated pension insurance and establishing institute of private pension funds. All reviews have been received from the State bodies.
According to the strategic plan of the Fund, in 2010 it is planned to apply accumulated scheme and participate in the investment and financial markets from 2015. In addition, the Fund is planning to achieve financial sustainability and attract all participants of the economy to the insurance, which will provide an opportunity to fight against shadow economy.
Already in 2006 the Fund submitted a law draft on private pension funds and possibly in 2008 the Parliament will adopt this law.
"At least ten years are required for the private pension funds to gat an opportunity to accumulate the pension finances of the citizens. Currently there are problems in placing pension finances in such funds. I think that it needs to develop financial markets in the Country to provide an opportunity to the funds to place the finances attracted from the pensioners," Muslimov said.
The draft law contains severe conditions for establishing non-State pension funds. In particular, there will be requirements for the capital, head of the funds, heads of the financial services. Some 5000 base pensions will be in demand to establish the pension funds. The heads of the funds should have at least three years work experience in the financial and insurance sectors. The license for the non-State funds will be given by the Ministry of Finance.
On the eve of adoption of the law, the Cabinet of Ministers of Azerbaijan made a decision changing the rules of giving licenses for several kinds of activities. Thus, the list of the documents for giving license was changed. So to receive license, the heads of the funds should present document on three years work experience in this sphere, as well as business-plan of the fund. Yet no license for the non-State pension funds has been issued.
The assistance in this regard will be provided by the World Bank (WB) which in co-operation with the Social Protection Fund of Azerbaijan, has been implementing a Project on Pension and Social Reforms in Azerbaijan since April 2005. One of the project's elements is to support the development of the system of the non-State pension funds. The Fund realizes a pension system development project with the US Trade and Development Agency (USTDA). The cost of the project is $1.1mln. the project will have three goals: to develop the system of actuarial accounts, to hold searches of the internal financial resources for the pension-insurance systems, as well as to model the use of strategic financial resources in the pension system.