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Challenges and prospects of the Pension system in Uzbekistan

02.12.2014

Challenges and prospects of the Pension system in Uzbekistan

Pension procurement is a major component of social protection and one of the main functions of the state which is assigned by the Article 39 of the Constitution of Uzbekistan: "Everyone has the right to social security in old age in case of losing physical ability, in case of breadwinner loss, and in other cases provided by the law."

The distinctive feature of the pension system of Uzbekistan is the high delivery rate to people of retirement age (over 75%), which has been supported in the country, despite the challenges of the transition period and the global financial crisis in 2008-2010. This indicator puts Uzbekistan in one line with developed countries, though its economy is still developing. It is not a secret that many emerging markets are characterized by the lack of comprehensive pension systems.

The pension system consists of two components: 1) the state part, based on the principle of solidarity between generations, and 2) the mandatory cumulative part (National Bank of Uzbekistan) introduced in 2005. To date, the capacity of the latter is still not fully used. Thus, the government continues to carry the pension burden in form of the Pension Fund under the Ministry of Finance, which generates resources for the payment of pensions through mandatory contributions from employers and employees.

The pension system needs some reforms. What are they? And how should they be done? Join our discussion and share your opinion on our Transformation Blog.