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Pensions In Central & Eastern Europe: Azerbaijan seeks Latvian and German expertise

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Back in November 2002, IPE reported that the Azerbaijan government was slower in reforming its pension system than other former Soviet republics.

In 2013, Azerbaijan and the European Union signed agreements for a twinning project, funded by the EU, which seeks to establish a funded non-state second pillar. Azerbaijan manages assets of over €27bn in its State Oil Fund.

The Caucasus nation aims to develop a funded element within the national pension system and promote a market for private pensions through the creation of a legal framework for non-state pension funds.

Latvia and Germany have been twinned with the country, which has a population of 9.7m, to “enhance capacity of the State Social Protection Fund of Azerbaijan (SSPF) to establish the regulatory, legal and administrative framework for the introduction of a funded element in the insurance-pension system and the establishment of non-state pension”, according to a 2014 mission statement.

Over a period of 18 months, starting in July 2014, experts from both countries will work together with Azeri officials to draft legislation for the new system, establish a mechanism for asset accumulation and fund management in individual accounts, and to raise public awareness through a communications policy.

Today, Azerbaijan’s pension system consists of a pillar with two components: One is a fixed amount every citizen receives independent of wage and dependent on contribution period; the other is an insurance component based on a notional defined contribution system.

The money is managed by the SSPF. It recently hosted a team from Latvia’s Ministry of Welfare to work on scenario calculations for a funded pension component in the state social insurance system. A specialist from the German Statutory Pension Insurance Scheme (Deutsche Rentenversicherung Bund) has been seconded to work alongside the Latvian delegation.

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