A sweeping pension reform may soon transform Azerbaijan’s retirement system, as lawmakers move toward the creation of private pension funds that would operate alongside the state system.
The initiative aims to give citizens more control over their future income and provide an additional layer of financial security in old age.
According to Vugar Bayramov, member of the parliamentary Committee on Economic Policy, Industry and Entrepreneurship, private pension funds will mark a major shift in how long-term savings are managed in Azerbaijan.
“The main advantage of this model is that once a person reaches retirement age, they will receive payments from two sources – the state pension fund and their private fund,” Bayramov said. “For instance, if someone accumulates 60,000 manats, they may be allowed to withdraw a portion – say, 20,000 – even before reaching the official retirement age of 65.”
He added that such a model aligns with international standards and will likely include provisions for partial early withdrawals in exceptional circumstances or for major life needs. Contributions will depend on both contractual terms and each individual’s financial capacity.
“The more a person contributes, the stronger their financial position will be in retirement,” Bayramov noted.
A unique feature of the system is that family members will be able to contribute on behalf of their relatives – for example, children funding their parents’ retirement savings.
Bayramov illustrated how the model could work in practice:
“If a citizen earning 1,000 manats a month invests 100 manats into a private pension fund, they would accumulate 1,200 manats per year. Over 30 years, that amounts to 36,000 manats – a sum that can either be partially withdrawn before retirement or kept intact to supplement their state pension.”
The lawmaker emphasized that the system will also be open to non-working citizens, who will be able to make voluntary contributions. The government is expected to introduce legal amendments to regulate private pension institutions, with the launch of the first fund anticipated next year.
