Tashkent, Uzbekistan (UzDaily.com) -- The Strategic Reform Agency of Uzbekistan conducted a study to identify the reasons for Uzbekistan’s low ranking in the Allianz Pension Ranking 2023.

According to the study, Uzbekistan ranks 71st out of 75 countries, while neighboring Kazakhstan ranks 34th, Russia 37th, and Turkey 59th. The ranking is based on three key sub-indexes: basic conditions, sustainability, and adequacy of the pension system.

Uzbekistan received an overall score of 4.5, reflecting an average assessment: 4.4 for basic conditions, 3.6 for sustainability, and 5.3 for adequacy. High pension contributions (12-25%) are accompanied by a low gross replacement rate (55%), indicating a mismatch between contributions and pension benefits. The low coverage of the pension system (38%) is linked to high informal employment and limited access to formal financial services.

Uzbekistan’s pension system is based on a mandatory system with fixed payments, largely financed from the state budget. Over the past 10 years, Pension Fund revenues have increased 3.4 times, while expenditures have increased 5 times, reflecting an increasing financial burden on the budget. Further increases in transfers from the state budget to finance pensions are planned, reaching 29% of total expenditures in 2023 and an estimated 38 trillion soums by 2030.

Professional pension plans are absent in Uzbekistan. The existing individual accumulative program is mandatory but insignificant due to very low contribution rates (0.1% of salary) and overly restrictive rules.

To improve Uzbekistan’s pension system, the agency proposes converting the mandatory accumulative pension account system, managed by the Central Bank, into a voluntary, flexible system accessible to other banks. 

It is also proposed to simplify the introduction of professional pension programs by large employers, with the possibility of collaboration with financial institutions.

The agency suggests setting contributions for self-employed individuals to the state pension fund based on their income, and allowing for low and infrequent contributions.

Additionally, improving the management of the state pension fund to reduce administrative and operational costs per pension, increasing transparency, establishing clear pension entitlement criteria, and implementing system automation are deemed necessary.

To increase formal employment rates, including for women, and expand the contribution base to the pension system, the Strategic Reform Agency considers it essential to develop a Presidential Decree project.

Key aspects of the project include conducting a comprehensive reform of the pension system, reviewing pension eligibility conditions and retirement age, increasing required work experience or contributions for pension receipt, and ensuring the financial sustainability of the pension system.