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Pension capital: what is it and how to build and calculate it?

An independent expert of the insurance market Dulat Telpekbayev talks:
Pension capital: what is it and how to build and calculate it?

- Dulat, could you tell us a little about yourself, and the opportunities for international insurance companies to create a retirement plan?

- I have been engaged in financial consulting as an independent financial adviser since 2010. I advise the citizens of the republic on life and investment insurance issues. I represent Kazakhstani and foreign insurance companies.

My first experience in this trade I obtained in the Swiss company "Save Invest", which had exclusive rights to promote products of the international insurance company "Medlife Insurance Ltd" in the CIS countries.

For reference, Medlife is a wholly-owned subsidiary of the Austrian concern GRAWE, founded in 1828 by Grand Duke Yogan, a brother of the emperor of the Austrian Empire, and registered as the "royal royal privileged intra-Austrian fire insurance community in Styria, Carinthia and Kraine".

By the present moment the consortium includes 16 insurance companies, 3 banks, 5 real estate management companies. To my great regret, "Medlife" ceased its activity on the territory of Kazakhstan due to certain restrictions placed by the financial regulator.

- And why did these difficulties arise? After all, every citizen of the country has the right to dispose of his money at his discretion and use financial services and products of foreign companies!

- You are absolutely right!

Article 28 Paragraph 2 of the Constitution of the Republic of Kazakhstan reads: Voluntary social insurance and creation of additional forms of social security are encouraged.

However, there are certain legislative conflicts that cause some inconvenience.

The situation will radically change in 2020, on completion of a five-year transition period after Kazakhstan's accession to the WTO, when foreign banks and insurance (reinsurance) organizations, if they meet the established requirements, will be able to open their branches in the country.

- If to talk about Austrian insurance companies, how do they work with pension products and why are these products popular?

- As you know, pension savings can be formed not only in pension funds, but also in life insurance companies if the insurer has a license to carry out this type of activity.

This happens as follows:

  1. Pension capital is built over a certain period of time with regular contributions.
  2. Pension capital is created instantly, with a single payment.

The duration of payments is set by the client himself: for a specific period or for life.

Insurance companies’ pay-offs, unlike pension funds, can be obtained before the retirement age attainment.

Annuity products are in great request not only abroad, but also in Kazakhstan. The legislation of the republic provides for such an opportunity for the population.

- Insurance products, life insurance particularly, are not very popular in Kazakhstan. How did the western countries overcome the attitude "after me, the deluge"?

- In my opinion, one of the main reasons for that is the negative experience gained by the older generation in the period of the USSR collapse.

Since the country was closed ("behind the Iron Curtain), people did not have the opportunity to diversify their political, economic, currency, and other risks, which ultimately led to enormous financial losses.

The existing circumstances contributed to the violation of the intergenerational continuity, when the positive experience of the elders was passed on to the younger ones.

Besides, the market lacks more active information promotion.

As a result, there is a situation when some people do not trust the financial system, and others have a cursory view about it or no view whatsoever.

In developed countries, insurance companies have been operating for more than 200 years, and they value their reputation very much, which indicates their high reliability.

Of course, for such a long period of time the residents of these states have formed a special financial culture: attitude to life, health, property, etc.

The situation in Kazakhstan is cardinally different. We have the opportunity to invest in various financial instruments, without being tied to a particular currency, both domestically and abroad.

- By the way, the life insurance company Nomad Life recently launched an interesting investment and insurance product "Nomad Gold", which has become an alternative to currency deposits. The company offered a cumulative policy with an annual rate of up to 3.26% in dollars, while some banks are giving the rates a bit higher than zero. Why did this product appear at this precise moment?

- In fact, this idea had been in the air of Kazakhstani insurance market for a long time, but it was launched only this year for a number of reasons.

First, this year the term of bank deposit agreements in US dollars with a high interest rate is expiring, and people will no longer have an alternative to receive attractive returns.

Secondly, in accordance with the amendments introduced in the tax legislation, payments from insurance companies on universal life insurance will no longer be taxed.

So these 2 factors, in addition to insurance protection, guaranteed high profitability, the lack of invested assets recovery and declaration, served as an impulse for this product to appear and give its positive results.

In fact, the insurance company is offering an alternative to the bank customers that have foreign currency deposits and realize that money must work efficiently.

"Nomad Gold" is the first product of universal life insurance in the Kazakhstan insurance market, similar to the instruments of investment life insurance of foreign companies.

I believe that this year we will witness the emergence of new proposals from other players in the insurance sector.


- Dulat, as a financial consultant, you are probably well aware of the main arguments of people about why they do not deal with their financial situation, have no financial planning and a culture of working with money. Could you share the basic typical excuses?

- Few people in Kazakhstan stick to a simple rule - pay you. Many in our country live for today, from paycheck to paycheck.

What is the meaning of the "Pay You" rule?

With each income, you first need to "pay" yourself, that is, to save some money, 10%-20%. Why do not many people do that?

The first excuse: you need to live in the present, do not wait for the future, perhaps I will not last to see it!

And if you do, then what?

If the future comes, and you are not ready for it! You are no longer strong, beautiful and healthy as you are now!

But thanks to the quality of life and medicine life expectancy is increasing today.

According to the UN, by the middle of the century 3.2 million people over 100 years old will live on Earth, while today there are over 343,000 of them.

More than 17,000 people have already celebrated the 100th anniversary in Germany.

By 2050, about 1% of the population of Japan will reach the age of 100 years and older.

Today there are 70 super long-living people in the world, whose age is over 110 years; 27 of them have already celebrated their 115th birthday.

Second excuse: why should I think about the future, if I have children, who I educate and invest in?

Stop. Your children will have their own children; they will also have high costs associated with their education. It would probably better not to be an additional burden for them, but be self-sufficient parents who still have the opportunity to help their grandchildren?


In Kazakhstan, with the introduction of a funded pension system, people born after 1979 can count only on themselves. If they do not make enough savings and a financial safety bag, their pension capital, then they will beg, because they cannot count on a state solidary pension. Everyone will live on what they save.

When citizens of our country, having reached retirement age, go on well-earned rest, they immediately face a shortage of financial resources, as wages and pensions are not comparable. Thus, a stressful financial vacuum is formed around these people.


To the main event in our life, when we do not want to or are not able to work, we need to prepare well in advance. In the active period of life should work on implementation of the pension plan, the building up of a retirement capital.

It is necessary to form it during the active period of life, at the age of 30-45.

Purpose instead of pleasures

People often spend money on momentary pleasures of life. A more practical and productive plan is to squeeze out these pleasures for the sake of creating working assets that will bring you good results in the future.


Learn to give up the momentary pleasures for the sake of a meaningful goal. Begin to apply this philosophy by cultivating the right financial habits, as it has well been said: “Habit is a second nature”.


It is a person's ability to maintain and reproduce the same actions with respect to his own funds.

Bad financial habits lead to debts, a chronic shortage of funds, and an overabundance of unnecessary things.

For example, women like over-packed wardrobes. Instead of giving to shops, choose the goal - to give your children a better education, and yourselves - to create a solid foundation of working and income-producing assets. Assets, unlike clothes, you can pass by inheritance!

Honoré Balzac said: "We always have money on whims; we just skimp on the costs that are useful and necessary."



1. Draw up a savings plan

2. Pay bills on the pay day

3. Maintain and control your expenses and incomes

4. Choose an interesting hobby instead of constant shopping

5. Pull off with a purchase for a month. If after 30 days it is still relevant, then you can go for a purchase.

Check and calculate the main expenses, which usually take place every month.

  • Apartment
  • Food
  • Clothing
  • Transport
  • Communication
  • Medicine
  • Add your own items

Keep in mind that with time the cost of living is growing, the products do not become cheaper, as well as utilities and medicine.

Let's say that you need 100 thousand Tenge a month for a modest life. The minimum reserve for 1 year of your life is 1.2 million Tenge.

The number of years that we, for example, will live is 10, 20, 30 years.

Thus, the minimum reserves for these years should be 1.2 million, 2.4 million and 3.6 million Tenge respectively.

Of course, this capital should not lie, but work to at least cover the annual inflation. Capital should not lose its purchasing power.

If you did not build your own pension capital, then definitely you will experience stress at retirement age, because you will not be able to afford a good medical treatment, so you will lose the life quality. And, as a consequence, it will affect the duration of your life.

- At last, - Dulat Telpekbayev says, - I would like the readers of to read the letter of the famous Dale Carnegie about pension annuities, which he wrote to his insurance agent.

Dale Carnegie's letter to his insurance agent:

"Recently, I sorted out my insurance policies I bought my first policy from you on March 16, 1920. You know, looking at it and other policies that I bought from you, I always ask myself: what would happen to this money if I did not invest it in life insurance?

Probably nothing would be left of it. Probably it would suffer the same fate as most of my savings, I lost a lot on the stock exchange and only a small part of my savings brought or would bring me profit. I also made other financial investments that led not only to losses, but also to anxiety and headaches.

And my life insurance neither brought me a headache no loss. Analyzing policies, I told myself how lucky I was that I had invested in life insurance. I am curious to know Frank, if you met a person of 50 years of age who would have regretted that he had invested in insurance for 20 or 30 years ago?

To be honest, looking back on my life, I regret that the court did not appoint you as my guardian on March 16, 1920 and did not force me to give every dollar of my savings, in addition to the money invested in my house, for investing in annuities.

In 1920, when I was 32 years old, I thought I knew where to invest, and, I am sure, the current generation feels the same way. Having lived 54 years, I came to the conclusion that investing money wisely is as hard as earning them.

You, Frank, are doing a great service to those whom you offer to invest in life insurance and if you find it fit to show my letter to those who doubt whether to buy insurance or not, you already have my permission".

Author: Botagoz Zhumanova, ex-member of the public council of the Single Pension Fund, journalist


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