Pensions will be calculated according to new rules: who is entitled to monthly supplements?

The bill amending the law "On Labor Pensions" has successfully passed its third reading in the Milli Majlis. The updated provisions will acquire legal force after being signed by the President of Azerbaijan. The effective date of the new provisions will be considered the first day of the current month. In accordance with the approved regulations, a certain group of citizens will be entitled to monthly supplements to their pension payments.

As reported by BAKU.WS with reference to Oxu.Az, this was announced by MP Vugar Bayramov on his social media page.

The parliamentarian explained the essence of the new provisions in detail:

"In other words, stable monthly payments will begin to be added to the base pension amount formed through social contributions, which will ensure a real increase in pensioners' incomes. Currently, pension provision for this group of people upon retirement is calculated based on their salaries rather than accumulated capital. The new changes strengthen the insurance mechanism, and upon retirement, fixed supplements will be added to the amount determined based on the accumulations in the individual personal account. This concerns civil servants, military personnel of the Ministry of Defense, and a number of other categories of individuals."

MP Bayramov provided an illustrative example of the calculation under the new scheme:

"If a citizen falling under this category has a pension capital of 100 thousand manats, then 85% of these funds will be accumulated in the individual account. Consequently, the balance will amount to 85 thousand manats. To calculate the funded pension amount, these funds must be divided by 144 (85,000 manats / 144 = 590.2 manats). Thus, the funded base will be 590.2 manats. Since the citizen belongs to the specified special category, a fixed amount will be added to the resulting funded portion. As a result: monthly pension = 590.2 manats + fixed supplement."

It should be noted that the division coefficient of 144 months (i.e., 12 years) is a standard indicator of the expected pension payment period used in funded pension systems of many countries around the world.

Vugar Bayramov also emphasized that under the new rules, a proactive procedure for assigning pensions and pension supplements will be introduced. This means that citizens will not need to apply to any government agencies — their pension amount will be determined and assigned automatically in electronic format.

"The amount of the established monthly pension supplement will be regulated by the agency designated by the relevant executive authority. Thus, at the time of the official approval of the amendments, a special decree will also name the body responsible for assigning these monthly payments," the MP concluded.