For certain individuals, pension rules are changing

The Milli Majlis adopted in the third reading amendments providing for the improvement of mechanisms for assigning pensions to civil servants, military personnel serving in the system of the Ministry of Defense, persons receiving pensions based on the term of office, as well as the application of a unified insurance principle.

As reported by BAKU.WS with reference to Oxu.Az, this issue was reflected in the draft laws submitted for discussion at today's parliamentary session on amendments to the laws dated December 22, 2023, No. 1074-VIQD "On Approval of the Regulation on Service in State Tax Authorities," "On Labor Pensions," "On the Status of Military Personnel," "On Approval of the Regulation on Military Service," "On Labor Pensions," and "On Military Duty and Military Service," as well as to the law of the Republic of Azerbaijan "On Diplomatic Service."

It is noted that the labor pension system operating in Azerbaijan functions on the basis of insurance principles, that is, on the basis of a mechanism for determining the pension amount based on the pension capital accumulated by the individual.

To this end, over the past 20 years, the link between pension provision and subsequently pension increases with the individual's wages was phased out, the pension amount began to be determined based on accumulated pension capital, and pension increases started to be carried out on the basis of a unified method — indexation.

The application of this approach contributed to strengthening the social well-being of pensioners, created guarantees for the regular increase of minimum and average pension amounts, and also positively influenced the strengthening of the financial sustainability of the State Social Protection Fund.

At the same time, the labor pension system retains payments that are not based on social insurance principles and are tied to wages at the time of retirement, which creates obstacles to wage reforms in the public sector and leads to the formation of unequal pension amounts.

In this regard, steps are being taken toward improving mechanisms not based on social insurance principles and bringing pension assignment conditions in line with modern requirements. Specifically, as the next step alongside the wage reforms being carried out in the public sector, it is envisaged to improve the mechanisms for assigning pensions to civil servants, military personnel serving in the system of the Ministry of Defense, persons receiving pensions based on the term of office, as well as to apply a unified approach based on the insurance principle.

The essence of the proposed changes in the pension provision mechanism for civil servants:

As noted, when persons in this category retire, their pension amounts are based not on the pension capital accumulated in their individual personal accounts, but on subsequent wage increases, resulting in a pension amount that is not proportional to the accumulated pension capital.

Calculations show that wage increases allow for the accumulation of sufficient pension capital.

According to the proposed new approach, the link between the pension amount and the state salary (wages) is eliminated, and the pension amount is formed on the basis of the pension capital registered in the individual personal