Social

Home page

Social

Azerbaijan changes calculation of insurance part of labor pensions, social insurance reserve to increase

30 September 2026 16:29 (UTC +04:00)

The amount of funds directed from mandatory state social insurance contributions to the insurance part of an individual personal account is changing, creating conditions for an increase in the social insurance reserve, APA reports.

This is reflected in a proposed amendment to the Law “On Labor Pensions” submitted for discussion at today’s meeting of the Milli Majlis.

Currently, the insurance part of an individual personal account is a sub-account in which 90% of the mandatory state social insurance contributions paid for insured persons and funds in the special account, which are taken into account when calculating the insurance part of a labor pension, are recorded. Under the draft, 85% of mandatory state social insurance contributions, rather than 90%, will be directed for this purpose. In other words, the insurance part of an individual personal account will be a sub-account in which 85% of the mandatory state social insurance contributions paid for insured persons and funds in the special account, which are taken into account when calculating the insurance part of a labor pension, are recorded.

Thus, one of the objectives of the reform is to create conditions for increasing the social insurance reserve in order to strengthen the social security system for vulnerable groups and enhance its sustainability. The main purpose of the social insurance reserve is to ensure the annual indexation and increase of pensions, including increases in the minimum pension and benefits for temporary incapacity for work, pregnancy and childbirth, childbirth, childcare and funeral expenses. Funds accumulated in the insurance reserve through social insurance contributions are ultimately redirected toward the effective organization of social protection for the population.

It should be noted that an additional 8 billion manats annually has been allocated under five social reform packages implemented over the past seven years. As a result, the minimum and average monthly pensions have increased threefold, while benefit and stipend payments have increased fivefold. The accumulated insurance reserve serves as additional support to ensure the sustainability of these increases.

Under another proposed amendment, 3% of mandatory state social insurance contributions, instead of the current 2.5%, will be directed toward administrative expenses. Currently, administrative expenses are expenses directed toward the administration of mandatory state social insurance, individual accounting in the state social insurance system, labor pensions and other social payment systems, with the upper limit set at 2.5% of the mandatory state social insurance contributions paid for insured persons. Under the proposed amendment, administrative expenses will be expenses directed toward the administration of mandatory state social insurance, individual accounting in the state social insurance system, labor pensions and other social payment systems, with the upper limit set at 3% of the mandatory state social insurance contributions paid for insured persons.

If the law is adopted, these provisions will enter into force on January 1, 2027.