An accumulative pension system may emerge. How will it work?
As part of the pension reform, it is proposed to develop the funded pension system in Uzbekistan. An expert spoke about how this system will work, the additional funds provided by the state, when the accumulated money can be withdrawn, and the mechanisms proposed for high-income citizens.
An accumulative pension system may be introduced. How will it work?
Currently, a three-tier pension system is in place in Uzbekistan. The first tier is the state pension, which is provided by the Pension Fund. The second and third tiers include accumulative and private or corporate pension mechanisms. Currently, the accumulative system is managed through Xalq Bank.
The state pension and the accumulative pension system should be viewed separately. They are independent systems from each other.
"In the state pension, a citizen's pension right is formed through the social tax paid by the employer. In the accumulative system, however, the citizen accumulates funds at their own expense and thereby forms their future pension right," said Sardor Fayzullayev.
The funds deposited into the accumulative pension account are the property of the citizen. They can also be inherited later.
The new project proposes a mechanism to encourage the low-income segment of the population to voluntarily save for their pension. In foreign practice, this is called a matching contribution — meaning that a certain portion of the funds accumulated by the citizen is also contributed by the state.
For example, if a citizen receives a monthly salary of 1.5 million soums and transfers 5 percent of it to their accumulative pension account, this amounts to 75,000 soums. According to the proposed mechanism, the state will add 50 percent of this amount — 37,500 soums.
As a result, a total of 112,500 soums will be deposited into the citizen's account in one month.
"The main goal is to encourage low-income citizens to save," said the official of the fund.
If the savings are kept for a long term, their amount is expected to increase due to investment income and the compound interest mechanism.
Although the accumulative pension funds are the property of the citizen, there are no plans to allow them to be withdrawn at any time and for any purpose.