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Authorities Find New Way to Save on Pensioners

2017 October 30 ( Monday )  17:12:25
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Русский Azərbaycan

The recent statement of Salim Muslimov, the Minister of Labor and Social Protection of Population on the application of the new formula for increasing labor pensions in Azerbaijan, on the basis of which indexation will now affect the entire amount of labor pensions, caused a considerable part of the Azerbaijani population to lift their mood and spirit.

Recall the amendments to the law On Labor Pensions provide a new form of growth of pensions in the country. The mechanism of indexation of pension, practiced for about ten years, or rather of its insurance part, in the amount of inflation for the previous year, was replaced by the pension indexation scheme in full, but already in the amount of the average monthly salary. Thus, the labor pension in 2018 will be increased in the amount of an increase in the average salary in the country this year.

Greeted by the generosity of the government, the elderly people lined up in long lines at local social protection centers to find out what documents are needed to register the pension and how their pensions will increase approximately in the next year. However, their joy quickly gave way to vexation and disappointment. It turned out that not all labor pensioners expect an increase in pensions. The innovation concerns those working pensioners who went on a deserved vacation six or more years ago. According to preliminary data, there are about 130 thousand such people in the country, considering that today about 300 thousand of the total number of pensioners continue to work officially - in the spheres of education, medicine, science, etc. Consequently, the remaining 170 thousand pensioners cannot count on an increase in pensions.

Will indexation affect only 10% of the total contingent of pensioners in the country? And what about the rest of the elderly? Who will compensate them for the overburden of the family budget in the amount of annual inflation, the level of which has already reached 14%? Do they have enough money in the state budget to index labor pensions if they consider that according to the new legislation, the basic part of labor pensions is abolished in the country?

As you know, earlier the base part was increased by order of the President, and the insurance part was indexed according to the percentage of inflation in the country. Now there is no concept of the basic part, as there is a full amount of pensions. It should be indexed. This is by law. In fact, as it turns out, everything is different.

To the questions of the correspondent of Turan one of the employees of the State Social Protection Fund, who asked not to be named, said the indexation under the new formula will affect 35-40% of working pensioners. As for the rest of working pensioners and all non-working pensioners, the old mechanism will act on them - the insurance part of their pensions will be indexed at the rate of annual inflation, the level of which may be below 14%.

This raises other, equally worrying questions: What prompted the government to move to a new formula for indexing pensions, if the country does not yet have a three-tier pension system, and there are no private pension funds and voluntary social contributions? What kind of indexation is beneficial - in the amount of annual inflation, but on the insurance part of the pension, or the full amount of the pension, depending on the dynamics of the average wage growth?

According to the independent economist Samir Aliyev, neither one nor the other option will play a significant role in improving the financial situation of pensioners.

"What does it mean to index half of the insurance part of the labor pension (on the law, only 50% of the accumulated insurance part of the pension is paid to pensioners - Author), in the amount of annual inflation of 14% or the full amount of pension at an average monthly salary of about 7% for the current year? See, what"s the difference? Although the innovation is presented as a benefit for our pensioners," the expert notes.

The authorities, depending on the state of the budget and the economic situation in the country, change tactics of action in the sphere of pensions. Over the past few years, the age limit for retirement has been changed twice - first from 57 to 60 years for women and from 60 to 63 years for mmen, and this year for both categories this milestone has reached 65 years.

The time of retirement is being carried further and further. The reason for the steps taken is clear - to reduce the burden on the budget, to reduce the amount of social spending, shifting them to the shoulders of the citizens themselves. The authorities save on retirees. This is indicated by the budget of Azerbaijan for 2018. The draft specifies that for payment of pensions, allowances, targeted social assistance, and allowances for internally displaced persons 2 billion 197 million manat will be allocated from the state budget, which is 6.6% less, compared to the current goal.

According to experts, today about 50% of retirees continue to work (officially, or illegally, or as a tutor, domestic servant, private driver, etc.) because of the threat of poverty and they are ready to retire, if at least their pension is the average salary in the country. No rapid effect will be produced by increase either in the age, or in the length of service.--0--