ABSTRACT
This paper presents a possible framework for implementing the second-pillar pension system as called for by the Law “On Labor Pensions” of the Republic of Azerbaijan. The proposed option consists of a de?ned contribution plan, in which both employee and employer contribute on a regular basis, with partial support of government. Simulating the effects for representative workers shows that, even in the most pessimistic scenario, participants in the second-pillar system who reach pension age can maintain a viable standard of living at retirement. This result is even more pronounced for workers in the lowest income group, because of the redistributive effect of the proposed reforms.
Keywords
Pension law; second pillar; income inequality, Azerbaijan.