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How retirement annuity works in Kazakhstan

Remaining life expectancy in Kazakhstan at the end of 2021 was 70.2 years, compared to 68.7 years a decade earlier and only 65.8 years twenty years ago. People in Kazakhstan retire at 63 (women - at 60.5, but by 2027 the figures will be equal), reports.
How retirement annuity works in Kazakhstan

Retirement annuity is gaining more and more popularity. Thus, at the end of 2021, the insurance premiums on retirement annuity agreements reached a record 130 billion tenge increasing by 82.1% over the year. It is known that by the beginning of 2021, 61,000 people signed retirement annuity agreements with LICs. Taking into account the annual growth in premiums, it can be assumed that by the end of the same year their number would already exceed 100 thousand people.

In turn, for three months of the current year, the premium income on retirement annuities is 18 billion tenge.

Please note that until 2019, when a surge in demand for this product was recorded, premium income was practically at the same low level. The rapid growth since 2019 is associated with an increase in the financial literacy of the population, as well as with large-scale digitalization of the insurance market and simplification of legislative norms in the sector.

The increase in demand for retirement annuities is due, among other things, to citizens' concern about a number of internal and external shocks and crisis phenomena in the economy of the Republic of Kazakhstan. Retirement annuity insurance provides a guarantee of stability in the future.

According to the results of the 1st Q 2022, only 7 out of 9 LICs received premiums on retirement annuity agreements.

LIC Nomad Life is the absolute leader in terms of premium inflow. For three months of this year, the amount of insurance premiums on retirement annuities has reached 6.5 billion tenge forming 36% of the entire market. Please note, that at the end of 2021, this company was also the segment leader as well. It is important to point out that the sustainability and reliability of Nomad Life is confirmed by a high rating “BB+” by the international agency S&P Global Ratings with a “Stable” outlook.

LIC Halyk Life is in the second place with 5.2 billion tenge, or 29% of the market. The TOP-3 is closed by Freedom Finance Life, the company’s premiums amount to 3.1 billion tenge.

The three leading companies form 82% of the entire retirement annuity insurance market.

The fact that the cost of retirement annuity has significantly reduced in the country became a positive news of the sector.

If in 2020 the sufficiency amount for concluding a pension annuity for men aged 55 was 11.3 million tenge, and for women aged 51.5 - 15.5 million tenge, this year a man aged 55 can purchase annuity for 6.7 million tenge, a woman aged 52 - for 9 million tenge.

Taking into account all the advantages of this financial product, we can say that retirement annuity is a kind of pension plan that allows the UAPF depositor at a fairly young and able-bodied age to form an alternative source of pension payments and secure a regular income at a disabled age.

Besides, several important issues related to retirement annuity are currently being considered in Kazakhstan. Thus, the Majilis is considering a draft law, which proposes to return to the UAPF from LIC funds that exceed the threshold of sufficiency for concluding a retirement annuity agreement.

Also, in order to expand the line of retirement annuity products, it is planned to introduce joint annuities, which imply the participation of not one person, but a married couple (close relatives) in the retirement annuity agreement. A joint annuity will allow combine the pension savings of spouses (close relatives) and redistribute income under an annuity agreement. For example, if one spouse does not have enough pension savings to buy an annuity in LIC, and the second has a surplus, then through a joint retirement annuity, lifetime payments are provided to both of them.

These innovations will give the retirement annuity market a new impetus for development and make it even more attractive.


Photos are from open sources.

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