As of January this year, people in Kazakhstan who have reached the age of 45 have been presented the opportunity to conclude a deferred retirement annuity agreement with life insurance companies. Deferred retirement annuity is one of the ways to get your retirement savings.
“A deferred contract is an agreement under which annuity payments will not be made immediately after its conclusion but after a certain period,” explains Kairat Chegebayev, the Board Chairman of Nomad Life.
A deferred retirement annuity is a product that allows persons who have a sufficient amount of savings in the UAPF to transfer their savings to a life insurance company from the age of 45 and start receiving payments from their retirement savings before officially retiring. As a rule, the employer made compulsory professional pension contributions for people employed at work with harmful working conditions. They have the opportunity to conclude a deferred annuity from the age of 40.
“Thereat, life insurance companies stabilize income leaving investment risks to themselves, - points out Galym Amerkhodzhayev, the Board Chairman of the State Annuity Company. - The payment starting date is set in accordance with the terms of the concluded agreement depending on gender, age and the presence of MPPC. The minimum age for receiving benefits in 2021 is 52 for women and 55 for men.”
The main condition is a sufficient amount of pension savings in the UAPF, which will provide annuity payments in the amount of at least 70% of the subsistence minimum. “The main advantage of a deferred retirement annuity agreement is the availability of guaranteed profitability, regardless of the rate volatility in the financial market. The life insurance company guarantees the return established by law on annual basis throughout the entire term of the contract, that is, for life,” says Gulmira Ubegaliyeva, the Board Chairman LIC Eurasia.
Amount involved
At present, the sufficiency amount for men at the age of 40 is 6,973,861 tenge, women - 8,632,647 tenge. “I would like to emphasize that the start of payments under such agreements has been postponed for 10 years. That is, the clients will be able to receive annuity payments only upon reaching the age of 50,” says Zhanar Zhubaniyazova, the Board Chairman of Halyk-Life.
At the moment, the amount of sufficiency for men aged 45 is 6,172,907 tenge, women - 7,725,673 tenge. “The cost of a retirement annuity depends on the age at which the client enters into a contract with a life insurance company. The more savings, the greater pension,” says Azamat Yerdessov, the Chairman of the Board of Freedom Finance Life.
Additional options
The payments under a deferred retirement annuity agreement are made for life. They are terminated in the event of the policyholder decease. The client can choose the option of the guaranteed period of annuity payments, the period during which payments are made regardless of whether the policyholder is alive or not. “In the second case, the payments are made to the persons specified by the client in the agreement or to his heirs. The duration of the guaranteed period and the beneficiaries in the guaranteed period are chosen by the client, the rest of the agreement terms are regulated by law,” Kairat Chegebayev clarifies.
Annuities are suitable financial products for individuals seeking a stable, guaranteed retirement income. “For example, if today a 55-year-old person signs a regular retirement annuity agreement and transfers 7 million tenge to the LIC, the amount of his monthly payments will be equal to 25 thousand tenge. However, if a 45-year-old person concludes a deferred retirement annuity agreement and transfers the same 7 million tenge to the LIC subject to the start of receiving payments in 10 years, then by the age of 55 his monthly payments will be equal to 43 thousand tenge,” Galym Amerkhodzhayev gives an example.
“One of the main pros of a deferred retirement annuity is a stable cash flow. The payments from the UAPF are carried out only up to the age of 80, life insurance companies provide monthly payments for life,” says Gulmira Ubegaliyeva.
Reliability
The security of pension payments under a deferred retirement annuity agreement is ensured by the Insurance Payments Guarantee Fund. “It is also worth considering the reliability of the chosen life insurance company, which is characterized by several factors. For example, the possession of the license by an authorized body, credit score, reinsurance in the world's largest reinsurance companies and a major participant (shareholder) capable of supporting the company in case of financial difficulties,” the Freedom Finance Life executive specifies.
The Board Chairman of Halyk-Life adds: “Since insurance companies have high requirements for financial stability from the regulator, insurers, as a rule, invest a significant part of their investment portfolio in debt instruments of high-quality and reliable issuers with high credit ratings, which allows them to be financially stable and reliable in the long term”.
“When choosing a life insurance company to conclude a retirement annuity agreement, you should take note of its reliability, which is, first of all, the size of the charter capital, compliance with prudential standards with a margin and a high credit rating from an international rating agency. This information is open and available on the companies’ and the National Bank’s websites,” Gulmira Ubegaliyeva noted.
