Is it possible to pay a loan from pension capital...

The retirement age of women has been raised in Azerbaijan since July 1. If until now women could retire at the age of 63, then from July 1, 2023, this age limit was raised to 63.5 years.

There are three types of pensions in Azerbaijan – age, disability and loss of the head of the family. One of the conditions for receiving an old-age pension is pension capital. However, persons who have accumulated pension capital before reaching retirement age cannot use this capital.

However, this practice exists in developed countries. For example, in the USA, a retirement account remains at the discretion of its owner. He is able to invest in investment funds, direct the accumulated capital to repay loans.

Gulnaz Akhmedova, who lives in Baku, told Azadlig Radio that despite the fact that she is 58 years old and has several years left before retirement, she has already accumulated the pension capital provided for by law and wants to use it: "I applied to the Pension Fund, they told me that we do not have a mechanism for implementing this wish. That is, I cannot spend the accumulated pension capital now because I have not reached retirement age. Then why is it spelled out in the law if the question of the share of the pension does not work?".

The Ministry of Labor and Social Protection of the Population informed Turan that from this year the pension capital is 40 thousand 320 manats. Since January 1 of this year, the minimum wage has been increased by 15 percent from 300 to 345 manats, the minimum pension has been increased by 40 manats from 240 to 280 manats. This also affected the minimum amount of pension capital. If last year it was required to collect at least 34 thousand 560 manats of pension capital, now this figure is 40 thousand 320 manats.

Member of the Milli Majlis Committee on Economic Policy, Entrepreneurship and Industry Vugar Bayramov also told Turan that, as in a number of developed countries, Azerbaijan has prepared proposals for the use of pension capital for other purposes: "Here we are talking about the use of a certain part of pension capital for other purposes. We propose to create conditions so that a part of the pension capital, for example, 1/3 of the total accumulated capital, a citizen who has this pension capital can use for other purposes before reaching retirement age."

According to the deputy, the funds can be used for healthcare, utility bills and interest payments on bank loans: "This will create conditions for more efficient use of pension capital. We propose, for example, if the pension capital of a citizen is 60 thousand manats, then a citizen has the right to use 20 thousand manats before reaching retirement age."

Economist Natik Jafarli told Radio Azadlig that there is no legislative prohibition in Azerbaijan on the use of pension capital or the transfer of these funds to family members by inheritance: "But there is no mechanism for exercising this right of a citizen either. Since there is no mechanism, a person does not have the right to dispose of his own capital. Therefore, the solution to this problem is seen as follows: either it is necessary to make serious changes to the legislation, or to create private pension funds. The contract with these funds should specify when and under what conditions a citizen can use the accumulated capital."

According to the expert, the problem of accumulating pension capital in Azerbaijan lies in the fact that with the growth of the minimum pension, the accumulative part of the pension capital to the state social fund automatically increases: "By Presidential decree this year, the minimum pensions were raised to 280 manats. Thus, the accumulative part of the pension capital was automatically increased. This is an incorrect binding and it should be eliminated. If the pension is raised tomorrow, the accumulative part of the capital will grow again. And considering that salaries are very low in Azerbaijan, few people can accumulate pension capital before retirement age."

The economist noted that a citizen who has not accumulated pension capital is forced to receive a low pension. He considers it necessary to eliminate this attachment in the legislation, proposing to apply in the legislation a scale of pension reductions corresponding to the accumulated pension capital.

Note: A person who has reached retirement age should be entitled to a pension or pension capital of at least the minimum amount of a labor pension, and in its absence it is necessary to have an insurance record of at least 25 years. The pension capital is determined by multiplying the minimum amount of a labor pension (which currently amounts to 280 manats) by 144. If the pension capital has not been accumulated enough, then the pension is awarded if there is an insurance record of at least 25 years.