Pension Reform – Still Topical

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-Togrul Bey, Deputy Minister of Labor and Social Protection Anar Kerimov said that within the framework of pension reforms, certain individuals will be able to receive a pension before they reach retirement age. According to him, a certain analysis of the issue of retirement should be carried out before reaching the retirement age of a certain category of the population employed in certain professions. In your opinion, is it possible to implement such a proposal? Is this a successful option for the pension system? In total, for whom is such an offer provided? Are there appropriate conditions and opportunities for its adoption?

-In Azerbaijan, according to the pension legislation, there is a group of people who can retire before reaching retirement age. These are persons engaged in the field of heavy work, law enforcement officers, as well as social groups, etc. In my opinion, this is a completely unsuccessful and incorrect option - to create conditions for a certain group of people for earlier retirement. In this case, this group gains superiority in terms of rights over other people. I think that such conditions for retirement should be created only for certain social groups, that is, people with disabilities, people suffering from various diseases. By the way, the law reflects that this kind of person can retire 5 years earlier. There must also be a second such group. For example, mothers and fathers with many children. Such social groups should be selected whose rights will be fully ensured. Representatives of these groups, retiring early, can take advantage of this more effectively. The main objective of the pension system should be that when people retire, they can be completely free from their jobs and use only pension. And in this case, conditions will be created for the younger generation to take the places of those who have retired. To retire early is not a very good option. People live a certain period. If we take into account that the salary in Azerbaijan is low, then the pension is also low, respectively. It turns out that people, being pensioners, are still forced to work or look for any other options in order to earn money. This, in turn, creates a number of problems. On the other hand, we currently do not have such difficult areas of work. Due to the lack of an industrial sector in Azerbaijan, it cannot be said that someone works in our difficult field. There should be certain criteria that would be the same for all population groups, with the exception of social groups.

- The chairman of the parliamentary committee, Arif Rahimzadeh, says that in the pension system one should refer to the experience of the states of the Eurasian Economic Union. According to the deputy, according to this experience, social security is implemented according to the conditions of each state. Regardless of which country of the union a person works in, with a pension appointment, this experience is taken into account. Each member country determines the size of the pension and provides the calculation of the pension, according to its legislation, the pension is provided according to the entire length of service. In your opinion, what does the sounding of such a proposal mean for a country that is not a member of the Eurasian Economic Union? What is the purpose? By and large, is the proposal logical?

-Eurasian Economic Union - the name shows that this is a single economic zone. Such an economic zone exists in the European Union. The deputy therefore cites the Eurasian Economic Union as an example, because this is a new system that is gradually starting to work. This question is very important because, according to unofficial information, about 2 million Azerbaijanis live in Russia, as our government often voices. Half a million live in Ukraine, and tens of thousands of Azerbaijanis live in other post-Soviet countries. Despite the fact that these people live there, they still have not renounced the citizenship of Azerbaijan, their place of residence is Azerbaijan. Working in other countries, they come to Azerbaijan. And having aged, they usually return to Azerbaijan forever. Upon returning to their homeland, they are not counted as a separate group. They are part of the population of Azerbaijan. And they are paid a pension. People who lived and worked in these countries, upon returning after 10-15 years and reaching retirement age, will realize that they are deprived of it, since they were not registered with the pension. The State Social Protection Fund has not collected any information about them and cannot pay them anything. In the future, this may turn into a social problem. If the system that the deputy speaks about is created, this could be a positive step. We are not within the framework of the Eurasian Economic Union, because we are not a member of it, but we can create the same system on the basis of bilateral agreements. The State Social Security Fund may coordinate this issue with the pension funds of these countries. This should not be limited to the countries of the Eurasian Economic Union. Recently, migration to European countries has increased. It is necessary to conclude agreements with these countries so that people in old age can receive a pension upon returning to Azerbaijan. These people, working abroad, could make payments to the pension fund in order to subsequently receive a pension upon returning to Azerbaijan.

-The chairman of the Committee on Labor and Social Policy of the Milli Majlis, Hadi Rajabli, said that seniority working in Russia is not taken into account in determining the pension in Azerbaijan. According to him, many Azerbaijanis work in Russia, and they must make payments to the State Social Security Fund. In your opinion, how much will it be right?

-As I already said, people work in other countries, earning a living. But they must also secure their future. Most workers in Russia make certain payments there that go to the budget of that country. However, returning to their homeland, they remain without a pension. If cooperation between the pension funds of countries was possible, this would be a good incentive for people. That is, people would calmly, upon returning to Azerbaijan, receive their payments in the form of a pension. I think that would be an interesting step. And this could be done with the consent of the people themselves. That is, the State Fund for Social Security should not receive these payments according to its will. It is possible that a person working abroad does not wish to return later. That is, these payments should be made at the request of the people themselves. This should also apply to those people who, working in another country, return to their homeland as soon as they find work here for themselves. However, the experience of these people is lost. So that it does not get lost, steps must be taken, about which I spoke above.

-According to the latest amendments to the law “On labor pensions”, the retirement age of women and men has been changed. According to the decisions of July 1, 2019 and June 30, 2020, the retirement age of men will be 64 years and 6 months, and women - 62 years and 6 months. That is, pensions will be built on the age system. In your opinion, is this system successful in Azerbaijan? Could a more successful system be applied? Why is the experience of countries with a more successful system not used? Which country's pension system is most acceptable for Azerbaijan?

-Our pension system is not seriously different from the existing pension systems in the world. In any pension system, two main criteria are used: age and seniority.

First, let's deal with the question of age. Now, a phased increase in the retirement age to 65 years is being implemented in Azerbaijan. By about 2027, the retirement age for men and women will be 65 years. But there are many problems. So, according to the Law on the retirement pension, and the relevant rules, the expected paid pension is 144 months or 12 years. Thus, men who retire in 2024, as well as women who retire in 2021, will be persons born in 1959. According to official information, the life expectancy of those born in 1959 will be 70.9 years. That is, retired women can live 8.9 years, and men 5.9 years. In other words, people live in retirement for 5–9 years, not 12 years, as calculated by the expected paid pension.

The second question is experience. On the issue of seniority, only those who work in Russia do not face problems. Azerbaijan itself also has problems with this. Thus, for a long time instability reigned in the economy of Azerbaijan, therefore, entrepreneurs did not conclude official agreements with people. As a result, this period of work was not counted as experience. That is, for most people who worked during the period of independence, work experience is very low. However, according to the pension legislation, a 25-year insurance period is required. The consequences of this we already see. Due to the fact that many people do not have the relevant experience, they were deprived of pensions. As a result, additional amendments were made to the law on labor pensions. According to the amendment, "regardless of the size of the pension capital as of July 1, 2018, retiring, his insurance experience for the period until January 1, 2006 will automatically be counted as 25 years."

Continuous changes reduce the level of trust in the pension system and the stability of this system.

The number of people falling into this situation will increase. This is already evident from official statistics. According to official statistics, every year the number of people over 60 years old is increasing. Whereas on January 1, 2008 they amounted to 8.09%, then for the corresponding period of 2018 they were already 10.79%. At the same time, their total number, according to official information, increased from 710.6 thousand to 1,067.7 thousand or by 5.2%. Despite this, the number of retired people is decreasing every year.

According to the information provided by the State Social Security Fund, whereas in 2016, 62.2 thousand went to a paid pension, then in the first half of 2018 this figure was 10.3 thousand. At the same time, in the first half of 2018, the number of people who withdrew from the pension account due to death was greater than the number of those who entered the pension account. Thus, in 2019 it was predicted that the total number of pensioners will amount to 1287 thousand. This is 3% less than in 2017.

I think it is the current 25-year “insurance experience” that needs to be reduced. The relevant ministry put forward in its time a proposal to reduce to 12 years. But there is still no result. I think we should use international experience. For example, in Germany the minimum insurance period is 5 years, in Russia - 7 years, and in the UK - 10 years.