As of preliminary data, the incomes of the State Social Security Fund (SSSF) comprised 501.2m AZN in 2005, which is 5.5m AZN more than the 2005 forecasts and 20% more than 2004. Incomes increased at the expense of the over-fulfillment of obligatory social insurance payments by the non-budgetary-organizations. They fulfilled the forecasts by 102.8%, while the budget organizations by 93.4%.
Major part of incomes of the SSSF (64%) was formed at the expense of transfers of obligatory social insurance payments. In 2005 it was predicted to receive 312.2n AZN, of which 96.6m AZN were payments from the wage fund of the budgetary organizations, 13.8m AZN deductions from he salaries of budget employees, 5.4m AZN non-budgetary funds of budgetary organizations and 196.4m AZN other insurers.
Despite a 4-point cut in social insurance rates from the beginning of 2005 social insurance rates (from 29% to 25%), the revenues grew 12.7% as compared to previous year and comprised 314.5m AZN. 64.2% (201.8m manats) of the total sum covered by the non-budget organizations. It seems, the expectations of the Fund that cut by 5 points would increase the transparency in the wage calculation system and end dual accountancy justified themselves. However, the SSSF regards repeated cut in rates of obligatory social insurance payments as insufficient, for the existing rates are profitable for employers and being lower than taxes enables the employers to take into consideration the expenses for payment of direct price of products.
Major source of compensation of the cut in social tax rates was a doubled increase of minimal salary in 2005: from 1 January 2005 to 25 AZN and from October to 30 AZN. The same time, the losses were covered at thee expense of attracting new insurers. With this respect a Department for Work with legal entities in Baku was established at the SSSF in July 2005 and it is charge of implementation of social payments to the SSSF and control in 11 administrative districts of the capital. Only on the first month of its functioning the Department collected from legal entities 1.4n AZN more than previous months. The SSSF closely cooperates with the Ministry of Taxes, the Inspectorate on Labor pf the Ministry of labor and Social Security and the Justice Ministry for registration of the employed people. The Justice Ministry will officially present information on the newly registered objects, while the Ministry of Taxes submits a list of physical and legal entities, who were granted an ID number. It helps to reveal the unregistered employees which the SSSF registers in the shortest period.
If to take into consideration the demographic factor, the calculations by the Azerbaijani government testify that in this century the demographic situation in the country might get aggravated following rise in old people. The pension reforms do not stipulate changes in the pension age.
Last year the expenses of the SSSF grew by 19.4% and made up 497m AZN instead of 495.7m AZN. 474.2m AZN was directed at payment of pensions and benefits, which comprises 95.4% of all expenses. Under the State Program on socio-economic development of regions the SSSF approved 4.04m AZN to finance 16 facilities built for disabled and shehid families.
Besides, expenses were also linked with the increase of average monthly pensions for non-working labor pensions by 20.7% to 33.8 AZN. Monthly expenses for payment of labor pensions were increased by 6.5m AZN. In accordance with the changes to the Law on Pension provision of state officers, the pensions of 4700 people were reconsidered and the additional expenses comprise 550,000 AZN.
The expenses were purely of mechanic character in 2005, which included the banking expenses in connection with payment of pensions and benefits of population, as well as expenses in connection with transition to payment of pensions in the capital and in regions on the base of plastic cards (6.7m AZN). Now 37% of all pensioners (504,000 people) receive pensions by plastic cards. 272,000 of such pensioners reside in Baku and Sumgayit. 164 cash-vending machines and 115 POS-terminals have been installed in this respect. 232,000 pensioners receive benefits by plastic cards. In this respect the agent banks of the SSSF installed 176 cash0vending machines and 56 POS-terminals.
Thus, in 2005 the budget of the SSSF was implemented by 4.2m AZN. If to trace the execution of the budget of the SSSF from the beginning of the year, one can observe that in the first quarter of 2005 surplus of the budget of SSSF made up 1m AZN, without debts. The expenses were fully executed in the amount forecasted. Over 4 months of 2005 the budget of the SSSF ended with a surplus, which comprised some 4m AZN.
High revenues of the SSSF in 2005 enabled to finance pension and benefits timely. The process came to an end in the country on 23 December 2005. Today minimal pension rate in Azerbaijan is 25 AZN, though minimal salary rate in the country was increased to 30 AZN in October 2005. The average pension rate is equal to 29.4 manats.
According to Muslimov, the chairman of the SSSF, work over injecting changes to the pension legislation, After injection of changes the notion of minimal pension will not be used the new changes will enact into law in 2006.
2006 will be a breaking year full of innovations in reforms in the pension. Especially, the social security system will be separated from social assistance, social pensions will be equaled to social benefits and the Ministry of Labor and Social Security will be involved in their repayment. The functions of the SSSF will be concentrated on the collection of social insurance of the workers of the country. 1.5 million certificates of social insurance, after the distribution of which the number of those to receive pensions will be clarified.
Major source of the incomes of the SSSF will remain the collection of obligatory of social insurance payments, which will comprise the dominating 70.4% of aggregate incomes of the budget of the State Fund, or 400.47m AZN. The second article of the SSSF incomes were transfers fro the public budget, which will constitute 29.4%, or 167m manats. In difference to previous years when the public budget transfers were directed at social security of pensioners, in 2006 it is planned to direct the funds at financing 37.4% of base pension, i.e. the fixed part, which can be raised at the governments decision.