Accra:The country is revising the allocation of funds from mandatory state social insurance contributions to the insurance portion of individual personal accounts. This change aims to increase the social insurance reserve, as reported by APA.
According to Azeri-Press news agency, the amendment to the Law ‘On Labor Pensions’ was discussed and approved during a meeting of the Milli Majlis. The current system directs 90% of mandatory contributions to individual accounts, but the amendment reduces this to 85%, reallocating 5% to enhance the social insurance reserve. This reserve is crucial for the annual indexation and increase of pensions and benefits related to temporary incapacity, pregnancy, childbirth, and other social expenditures.
Over the past seven years, Azerbaijan has implemented five social reform packages, allocating an additional 8 billion manats annually. These reforms have resulted in a threefold increase in minimum and average monthly pensions and a fivefold rise in benefit and stipend payments. The accumulated insurance reserve supports the sustainability of these enhancements.
Additionally, the amendment proposes increasing the allocation for administrative expenses from 2.5% to 3% of mandatory contributions. This increase will cover the administration and individual accounting within the state social insurance system.
These changes, subject to the law’s adoption, are scheduled to take effect on January 1, 2027, following their approval in the third reading of the draft law.