For four years, resident of Chingeltei District O.Oyunsuvd has worked for a construction drawing and project company in Ulaanbaatar. Her base monthly salary is 2.5 million MNT, but after taxes and mandatory social insurance contributions she takes home about 2 to 2.1 million MNT in cash. Although she is still a young employee who has only recently entered the workforce, O.Oyunsuvd says she has already begun studying the country’s pension system, unemployment benefits and social welfare programs. “Everyone grows old eventually, and anyone can lose the ability to work. That’s why I try to understand how pensions and benefits actually work,” she said.
Under Mongolia’s current system, if she continues to receive her current base salary and works in the country for at least 20 years, the law suggests she could receive a monthly pension of slightly more than 1.1 million MNT. Yet when she began calculating her own finances, she started to question the value of the system. Nearly 400,000 MNT is deducted from her salary each month for taxes and social insurance contributions. “If I simply saved that money myself, in 20 years it would amount to around 100 million MNT. Moreover, if you consider interest and careful financial management, the amount could be even higher,” she shared. While she acknowledges that every citizen is obligated to pay taxes and contribute to the state system, O.Oyunsuvd believes people want greater assurance that the money they pay will provide adequate support later in life. “It would be good if the money we contribute were returned in a way that is enough to live on when we grow old, become ill, or face an accident. But right now, it doesn’t always feel that way,” she added.
The concerns of younger workers like O.Oyunsuvd stand in contrast to the experiences of older Mongolians who entered the labor market during the country’s turbulent transition to a market economy in the early 1990s. G.Munkhtuya, a 54-year-old resident of Sukhbaatar District, recalls that period as one of the most difficult times to find stable employment. “I entered the labor market in 1990, and it was a very hard time. Jobs were scarce and people had to take whatever work they could find,” she noted. Over the years she worked in numerous positions, including as an elevator operator, a trolleybus conductor, and an employee at the Urban Development Department. Later she worked as a cashier, accountant, and waitress for companies such as Noyon Khairkhan and Aziin Durvun Uul. In total, she estimates that she worked for nearly 20 years, yet when she began preparing for retirement she discovered that only 12 years and four months of employment had been officially recorded.
Many of the companies she worked for had either gone bankrupt or failed to pay social insurance contributions on behalf of their employees. During the 1990s and early 2000s, when unemployment was high and private companies were just beginning to emerge, such problems were common. The Government later granted two to three years of credited service to people who had worked during that period, but gaps in records remained for many workers. G.Munkhtuya tried to recover her missing years by searching through archival documents, but many records had disappeared. She even attempted to locate former colleagues who could testify about her employment history. “I kept searching because I wanted to prove the years I had worked. In addition, Mongolia’s retirement age has gradually increased, meaning I must now wait another two years and three months instead of retiring at 55 as I had once expected. Because I have not been formally employed during the past year, I will qualify only for a proportional pension rather than a full one. At today’s rates, I expect it to be about 650,000 MNT a month when I become eligible in three to four years. A single mother raising three children, I now earn a modest living by working as a taxi driver,” she highlighted. Her experience reflects a broader uncertainty shared by many Mongolians about whether decades of work and mandatory contributions will ultimately provide enough financial security in old age.
‘After a 15 million MNT pension loan, I receive only 250,000 MNT’
G.Gankhuu, a resident of Chingeltei District, said he retired in 2020 after working continuously for 32 years and is now 74 years old. He currently receives a full old-age pension of 790,000 MNT, including the increase added last January. However, he mentions the amount is far from sufficient to cover his living expenses. “It is not enough to go to a nursing home, play sports, or even buy quality food. I spend the entire pension within a week of receiving it,” he explained. According to him, the prices of goods, services and medicines continue to rise steadily, placing increasing pressure on elderly citizens who depend on fixed incomes. G.Gankhuu also took out a three-year pension loan of 15 million MNT to help his son with his business, which further reduced his monthly income. As a result, he now receives only about 250,000 MNT each month after loan repayments. “My children help me, but overall life is still difficult,” he said. In response to these challenges, he has joined efforts with other senior citizens to organize and advocate for higher pensions. “We gather and raise our voices to increase pensions for the elderly. It would be good if our efforts bring real results,” he added.
Not all retirees share the same experience. Ch.A., a resident of Khan-Uul District, expressed satisfaction with his pension after serving in the police force. “I worked in the police for a total of 26 years, including two years in the army, and I retired last year at the age of 44. Upon retirement, I received a 36-month severance allowance and now receives a monthly pension of 1.8 million MNT. I worked hard in the police agency from a young age. The pension amount is not small, and I am grateful for the support of the state,” he underlined.
Despite such differences in individual experiences, many analysts argue that the country’s pension system is facing serious structural challenges. Critics say the system has become outdated, the social insurance fund is under financial strain, and many elderly citizens receiving pensions and benefits have lived for years with dissatisfaction and frustration about the level of support they receive. As of 2025, approximately 419,000 people in Mongolia were receiving pensions, which is an increase of 108,000 compared with 2019. In other words, the number of pensioners has grown by more than 100,000 in just five to six years. Mongolia currently operates under a “solidarity principle,” meaning that people who are working and paying taxes effectively finance the pensions of retirees. However, demographic changes are putting increasing pressure on this system. As in many countries around the world, the average age of citizens is rising, while participation in the labor force is gradually declining. In 1990, six workers supported the pension of one elderly person, but by 2024 that number had dropped to 2.7 workers per pensioner. Projections suggest that by 2035, only two working-age people will support one pensioner, and ten years later the ratio could fall to just 1.5 workers per retiree.
Experts warn that if the pension system and its legal framework remain unchanged, the living standards of elderly citizens are unlikely to improve and the situation may worsen. The labor force is expected to shrink, while the life expectancy of pensioners continues to increase, meaning that pensions will need to support retirees for longer periods. This raises an important question: what steps should be taken now to ensure the sustainability of the system? Many believe successive governments must introduce comprehensive pension reforms, improve the legal and regulatory framework, and expand private pension funds or create opportunities for retirees to invest and manage their savings through wealth funds and other financial instruments.
Officials from the Ministry of Family, Labor and Social Protection and the General Department of Social Insurance say that discussions on these issues are ongoing. Head of the General Department of Social Insurance B.Batjargal said the agency mainly acts as an implementing body. “We work in accordance with the policies and directions issued by the government and the relevant sectoral ministries. So far, there has been limited discussion about reforming the pension and benefits system. Any decision to change the legal and regulatory environment will first have to be discussed in Parliament,” he reported. Meanwhile, a representative of the Ministry explained that under the Law on Pensions Provided by the Social Insurance Fund, pensions are adjusted annually based on the average inflation rate of the previous year. Within this framework, full and proportional pensions, as well as various benefits and welfare payments, were increased last January. The representative added that adjustments have also been made to improve retirement income, including reducing the salary calculation period for higher pensions from seven consecutive years to five. “We are currently studying and discussing a number of issues related to pension reform and modernization of the system. If a decision is reached and a draft law is submitted, the public will be informed at that time,” the representative said.
Temporary fixes instead of real reform
Many observers argue that the Government responses to pension issues have often been short-term and reactive rather than part of a comprehensive reform strategy. Decision-makers, critics say, tend to focus on immediate measures such as increasing pension payments, canceling loans, or raising electricity tariffs, which resemble “firefighting” rather than long-term policy solutions. As a result, meaningful structural reform across sectors has been delayed, creating a situation in which problems continue to accumulate over time. At the same time, global demographic trends are placing additional pressure on pension systems. Life expectancy is increasing worldwide, labor force participation rates are gradually declining, and urbanization is accelerating. These trends mean that more people will receive pensions for longer periods. For countries with relatively underdeveloped social security systems, such as Mongolia, this presents a particularly serious challenge.
As the number of working-age citizens declines, productivity growth may slow and wages may stagnate. Lower productivity and lower wages make it difficult for individuals to accumulate sufficient savings for their own retirement or to support elderly family members. Labor economist Dr. B.Batchimeg notes that Mongolia’s pension fund currently relies primarily on contributions from those who are actively working, along with allocations from the state budget. In many countries, however, pension insurance is treated as a major long-term investment mechanism. “In general, citizens are given opportunities to accumulate funds in both state and private pension funds, and open investment funds are created. The basic principle is that the more contributions a person pays while working, the larger the pension they receive after retirement,” she explained. According to her, the key challenge is to carefully calculate the balance between funds collected and funds spent, while ensuring proper management and oversight of pension assets.
Dr. B.Batchimeg also pointed out that broad participation in the system is essential. In Mongolia, many herders and self-employed individuals either do not contribute to the social insurance system or pay only the minimum amount. “If every working-age citizen were included in the social insurance fund and regularly paid contributions, the total assets of the fund would increase significantly,” she said. She added that government policies should also encourage the development of private investment funds. While Mongolia already has several private funds used by companies and institutions, their role could be expanded with greater state support and regulatory frameworks. “At a time when young people openly question why they should pay social insurance contributions and see them as a burden, it is crucial to begin meaningful pension reform. Otherwise, it may soon become too late,” the economist underscored.
International practice suggests that a modern pension system typically operates under a three-pillar structure designed to ensure financial sustainability and adequate retirement income. The first pillar is a state-supported basic pension system that provides a minimum level of income for elderly citizens. The second pillar consists of social insurance schemes based on contributions made by workers and employers during a person’s working life. The third pillar involves voluntary savings and private investment funds that allow individuals to build additional retirement assets. In this model, each citizen gradually accumulates savings through multiple channels, such as public, social insurance, and private, thereby creating a more balanced and resilient system.
Some countries have also successfully linked their pension systems with national wealth funds built from natural resource revenues. Nations such as Canada, Norway and Singapore regularly allocate portions of resource income to sovereign wealth funds, which are then invested globally. These funds grow over time through investments in stocks, bonds, real estate, infrastructure and other financial instruments. The returns generated from these investments can then help support pension systems and strengthen long-term financial security for citizens. Experts suggest that similar strategies could be explored in Mongolia, allowing natural resource wealth to contribute more directly to the stability and sustainability of the country’s pension system.
