7 years of service — and a pension: The Ministry of Economy and Finance proposed a new look at the pension system of Uzbekistan

7 years of service and a pension: Ministry of Economy and Finance proposes a new look at Uzbekistan's pension system

Today, seven years of official employment is enough to receive an old-age pension. But how fair is it when a person who paid social tax for only 7 years receives a state pension guarantee comparable to that available to people who have worked officially for decades? The Ministry of Economy and Finance proposes to review the very logic of the pension system.

In Uzbekistan, to be granted an old-age pension, it is sufficient to have at least seven years of official work experience. Such a minimum threshold makes it possible to provide basic social protection to those who, for various reasons, did not work officially for most of their lives.

However, this norm has another side.

If a man starts working at age 18 and continues until 60, his potential career path is 42 years. Seven years of official employment is only 17% of this period.

In other words, today the right to a pension can be obtained by officially working for only a small part of one's working life.

The Ministry of Economy and Finance provides a clear example.

A citizen receives a salary of 1.5 million soums and officially works for seven years. During this period, 15.1 million soums of social tax are transferred to the pension system for him.

If he then receives a pension until the age of 73, the total amount of payments will be 127.9 million soums.

The difference is 112.8 million soums.

According to the example, it is this amount that is covered by the Pension Fund and the state.

As a result, a kind of financial asymmetry arises: a short participation in the system gives the right to a significantly longer stream of pension payments.

At the same time, this is not about the state abandoning the social protection of people with short work experience. On the contrary, the seven-year threshold performs an important social function. The question is different: how much does the current system encourage citizens to work officially for 20–30 years?

Who will be interested in working officially for 30 years?

Let's imagine two workers.

One worked officially for 25–30 years, regularly paid social taxes and built up his pension history.

The other has the minimum 7 years of experience.

Obviously, the contribution of these people to the pension system differs significantly. Consequently, the difference in their pension provision should also be noticeable.

The current rules provide for such differentiation: for each full year of service in excess of the established requirement, the pension increases by 1% of the average monthly wage. In addition, additional bonuses are provided for certain categories of citizens.

However, the Ministry of Economy and Finance is actually raising a broader question: is this enough for a citizen to be economically interested in long-term official employment?

The low minimum threshold has an obvious advantage — it does not leave people with a short official work history without pension support.

But at the same time, a risk of another kind arises.

If a citizen knows that seven years of official work is enough to receive a pension, the economic motivation to spend decades in the official sector may decrease.

As a result, the pension system faces two tasks at once, which are not always easy to combine: to provide basic social protection and at the same time to encourage citizens to remain in official employment for as long as possible.

The Ministry of Economy and Finance also draws attention to international practice. In Russia, Moldova, Ukraine, Poland, and Turkey, the minimum required experience is 15 years, in Belarus — 20 years.

At the same time, the International Labour Organization recommends not setting an excessively high threshold: according to the cited position, it is advisable to limit the minimum experience for receiving an old-age pension to 15 years.

For a 42-year potential period of labor activity, 15 years is about 35%.

This approach allows preserving the pension right for people with an incomplete work history, but at the same time making it more closely linked to the duration of official work and contribution to the system.

In essence, we are talking about a revision of the philosophy of the pension system.

The model "reached retirement age — received a pension" should gradually give way to the principle "worked officially, paid contributions, built up experience — received a pension corresponding to one's contribution."

At the same time, an increase in the minimum experience, if considered, should, in the opinion of the Ministry of Economy and Finance, take place in stages. The goal should not be to deprive citizens of pension rights, but to strengthen the link between official employment, the length of service, and the size of the future pension.

For the economy, this is of fundamental importance. The more pension rights depend on official employment, the higher the incentive to come out of the shadows, register officially, and pay taxes longer.

And for the Pension Fund, this is already a matter of financial sustainability.

Seven years of experience is the minimum social threshold. But if the pension system wants to be both sustainable and fair, over time the main indicator may become not only the age of a citizen, but also how many years he worked officially and what contribution he managed to make to the system.