BAKU, Azerbaijan, June 24. The private pension
fund can boost the capital market in Azerbaijan, Secretary
General/CEO of PensionsEurope, Matti Leppala, told Trend in an exclusive
interview on the sidelines of the 11th Azerbaijan International
Insurance Forum held in Baku.
"The development of a multi-tiered pension system in Azerbaijan,
especially the formation of the second and third pension pillars,
can both strengthen the sustainability of pension provision and
attract long-term investment resources to the country's financial
market," he explained.
According to him, one of the main similarities between the
Azerbaijani and Swedish pension systems is the introduction of
nationally determined contribution (NDC) accounts in the first
pillar.
"This is one of the reforms that has been successfully
implemented in both countries and has yielded positive results. At
the same time, there is great potential for expanding the funded
pension system in Azerbaijan. However, the main issue is how to
attract people to this system. Although there were opportunities
for voluntary payments in the past, interest in this was limited.
In Sweden, payments to the funded part are more mandatory, and
there are incentives for additional voluntary savings. In this
context, it's important that the savings process is more accessible
and encouraging in Azerbaijan," he noted.
Leppala pointed out that a financially sustainable multi-tier
pension system increases the stability of the overall system and
reduces the burden on public finances.
"Transfers are made from the state budget to the pension system
in Azerbaijan. A multi-tier model can help reduce this pressure. In
addition, the income from investments of pension funds strengthens
the financial sustainability of the system. Against the backdrop of
an aging population and changing demographics, people's
accumulation of additional funds for their pensions during their
working life increases both the adequacy and stability of pension
provision in the future," he emphasized.
According to the head of PensionsEurope, the creation of private
pension funds can also make a significant contribution to the
development of local capital markets.
"The experience of many countries shows that after the formation
of private pension funds, they invest more in local capital markets
and local companies. Investors and funds usually prefer the economy
they know better. Although in some countries there are legal
requirements in this regard, even when these restrictions are later
removed, a significant part of the funds is still directed to local
markets. This approach has yielded positive results in terms of
economic development and deepening of capital markets in many
countries that have created private pension funds," Leppala
added.
