Azerbaijan needs to create private pension funds

Private pension funds should be established in the pension-insurance market of Azerbaijan,  State Social Protection Fund (SSPF) Head Salim Muslimov said at the presentation on theme "Medium and long-term financing of pensions" organized jointly with the German State Pension Insurance Fund.

"First, an appropriate legislative framework should be established in order to create private pension funds. After this, one should get a license from the Finance Ministry," Muslimov said. "The fund's draft 2011-budget provided funds to implement measures under the State Pension- Insurance System Development Program for 2009-2015. One of such measures is solution of questions to establish the legal framework for private pension funds. "

According to him, the new pension insurance system, which Azerbaijan seeks to achieve, consists of three stages.

"This is a three-tier system. The first stage includes the mandatory pension insurance by the government. The second stage includes a portion of the system of compulsory pension insurance, dealing with real investments, which involves the embedding of part of social insurance premiums to bank accounts, placing in various financial instruments, and increase of pensions due to profits. The third stage involves the creation of private pension funds and receive of supplementary pensions by pensioners as a result of these funds' activities," Muslimov said.

He said such a system is successfully operating in Germany and other European countries.

"But at the same time, the second and third phases are at greater risk. During the economic crisis, the third stage's loss amounted to 40% in Germany. This is a very great volume. On the one hand, the lack of such tools in Azerbaijan rids the country of such losses. On the other hand, receiving pensions from three different sources will lead to an increase of pensions. The SSPF will work in this direction in subsequent years," he added.

Amounts of obligatory contributions should be increased to realize the second phase, he said.

"The beginning of the second phase is more important now. Amounts of obligatory contributions should be increased for this," Muslimov said.

The presentation on "Medium-term and long-term financing of pensions" is held in Baku on Oct.13-14. At the meeting with the German delegation, Muslimov discussed the future directions of cooperation between the SSPF and German State Pension Insurance Fund, as well as other issues.


/Trend/