AMBITIOUS GOALS OF SSSF FOR 2007

A sitting of the Commission for Social Policy of the Milli Majlis (Azerbaijan's Parliament) to discuss the draft 2007 Budget of the State Social Protection Fund of Azerbaijan Republic was as active as discussions over the 2007 Public Budget. The importance of the document more closely reflecting ordinary people's interests does not allow becoming indifference towards its content.

In accordance with the document in 2007 the incomes and expenditures of the Fund are forecasted at the level of AZN 920.19 mln, an increase of 56.1% from the figures of 2006. Over the past 15 years of the Fund's activities, such increase is followed for the first time

In 2006 the budget rose 18.4% as compared to 2005, in 2005 35.5% as compared to 2004 and in 2004 10.8% as compared to 2003.

In 2007, 72.9% or AZN 670,728 mln of the revenues of the Fund will be achieved from the transfers to the compulsory social insurance. The transfers from the budget will amount to AZN 248.29 mln, he said.

Such rise is explained by many factors, including increase of the number of people registered for social insurance in 2007 by 6% to 1,266mln people with the major part of foreign employees. The remittances on social insurance by the non-governmental organizations will comprise 52.6% of the total amount. Next year the remittances on obligatory social insurance will be left unchanged and comprise 25%, including 22% of the payments made by employers from the salary fund and 3% - payments from the monthly salary.

However, the landowners of the 1st category and members of their family will have to 12% instead of 6% of minimal salary in obligatory social insurance for each hectare of the land. For the landowners of the 2nd category the figures will be increased from 4% to 8%, third category from 2% to 4% of the minimal salary, 4th category from 1% to 2% of the minimal salary.

The Azerbaijani citizens working abroad are offered to pay 25% of the incomes in social insurance. At present the figure is equal to 80 of the minimal salary. The minimal salary is Azerbaijan is 30 manats in Azerbaijan at present. From 1 January its expected to increase to 40 manats and from 1 July 2007 to 45 manats.

One of the key tasks of the SSSF is the expansion of personal registration and establishment of the unified pension system.

The next important factor is transfers from the public budget will amount to AZN 248.29 mln. The budget will for the first time receive 19mln manats from the public budget for payment of pensions of the military. The public remittances to the SSSF for increase of the basic part of the pension ratio will make up 229.3mln manats.

Other expenses of the 2007 budget of the SSSF will constitute 1.22mln manats.

Rise in incomes is intended to justify the expenses directed at the implementation of payments labor pensions. Some 869,988 mln manats will be directed for payment of labor salaries, which constitutes 94.5% of all incomes. 94,5% of the gross revenues of the SSPF will be directed towards payments of the population. AZN 846 mln 850,500 will be spent on the payment to the labor pensions. The amount of these payments has increased by 56% as comprised to 2006.

In 2007 the average monthly size of the pensions in the country will be increased by 32,6% and will reach AZN 55,7.

The average monthly pension ration in Azerbaijan will comprise 28.7% of average monthly salary, though in accordance with the Social Charter of the Council of Europe the average pension should comprise no less than 40% of the average salary.

The 2007 budget of SSSF envisages the implementation of serious social programs. AZN 11.3 mln will be directed from the budget of the Fund towards the measures on employment, and on strengthening of the social protection of disable persons. AZN 13.4 mln will be spent in 2007 on keeping the central apparat and local organizations of the SSPF.

Next year it is planned to increase the amount of pension for the disabled. In 2007 the pensions for the first category of the disabled will be increased 41.7% to 85 manats and second and third groups 42.8% to 50 manats. Some 11.3mln manats will be spent on the social protection of the disabled

In 2007 some 9mln manats will be allotted for indexation of the insurance part of the pension, 5mln manats financing of employment measures.

Next year it is also planned to conclude work over establishment of information and technical base of individual social insurance, which will cut expenses for the maintenance of the SSSF's bodies from 2008. Thus, in 2008-2010 the SSSF is forecasted to maintain rise in the expenses and expenses of the fund, while the growth pace will not be as high as in 2007.

Starting from 2007 Azerbaijan will apply a pilot obligatory medical insurance (POI). The SSSF is ready to undertake the formation and management of the Fund of POI. They proposed to decrease remittances to the SSSF from 22% to 20% in 2008 to direct the difference (2% of the monthly salary) to the Fund of POI. It will enable to get rid of inefficiency of the earlier adopted law. The amount of medical services under POI is estimated to $200mln. On the one hand POI is expected to result in the development of the insurance market in Azerbaijan and on the other conduct of reforms in the health system.

Noting the plans of the SSF for the perspective, it is necessary to note that the SSSF has submitted the daft law on Private Pension Funds to the examination of the foreign embassies functioning in Azerbaijan, the International Monetary Fund and the World Bank, and afterwards the document might be considered at the parliament in the beginning of 2007. The draft law envisages tough rules for establishment of pension funds. There will be particularly requirements on the capital, the head of the Fund, heads of financial services of the Funds.

The capital needed for the establishment of the Fund is equal to 5,000 basic parts of pensions (175,000 manats as of 1 January 2007). The head of the fund is eligible to have no less than 3 year work experience in the sphere of finances, insurance, as well as legal or economic education.

Thus, the number of labor pensioners is expected to increase in the year to come, because those born after World War II will go on pension in this period. In 2008 some 81,000 people will retire, in 2009 92,600, in 2010 90,000, and in 2011 100,000 people. Respectively, Azerbaijani government's correct policy in the reforming of pension system bear fruit in the form of financial security of pensioners in future.

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