In the study course, insurers identified the most significant events related to the development and modernization of the pension system in the Republic of Kazakhstan over the past 10 years.
The Unified Accumulative Pension Fund (UAPF) was founded on August 22, which united all pension funds operating at that time in the country. It was founded on the basis of the State Accumulative Pension Fund (SAPF). Due to UAPF creation, the conclusion of retirement annuity agreements with LICs was suspended.
The Investment Declaration of the Unified Accumulative Pension Fund was approved on May 6, which had been developed in July 2013. At the same time, after a one-year pause initiated by the Government of the Republic of Kazakhstan, the conclusion of retirement annuity agreements was resumed.
The reform of the pension provision for employees of law enforcement agencies and military personnel began on August 2, 2015. As of January 2016, they switched to full state pension provision.
As of January, the size of basic pension has been increased by 7%, and as of July - by another 13%.
Another reform of the defined contribution pension system took place on January 1. Mandatory Employer Pension Contributions (MEPC) appeared.
One of the significant for Kazakhstan events took place in Russia on December 20, an agreement on pension provision for workers of the member states of the Eurasian Economic Union (EAEU) was signed. This agreement guarantees citizens of the participating countries equal rights to pensions, being in one of the EAEU countries, on an equal basis with citizens of these states.
As of January 1, the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM) became the regulator of the UAPF. Previously, this task was performed by the National Bank of the Republic of Kazakhstan.
Deferred retirement annuity (RA) was launched in Kazakhstan. Its main advantage is that people do not have to wait for the official retirement and may start receiving pension payments much earlier. Until January 2021, retirement annuity was considered an expensive insurance product: men entered into an agreement with LICs with a minimum sufficiency of 11.3 million tenge, and women - 15.5 million. As of January 2021, the amount of sufficiency for concluding a RA almost halved for men - up to 5 million tenge, and for women - up to 7.5 million tenge.
In 2021 Kazakhstani people also got the opportunity to early withdraw part of their savings from the UAPF to improve housing conditions, pay for medical treatment, or transfer it to a private trust, for example, to a close relative.
On September 1, in his message to the people of Kazakhstan, the President Kassym-Jomart Tokayev said that from 2023 to 2028, the retirement age for women would be 61, which had been previously planned to be gradually increased to 63 years. The head of state also announced measures to gradually increase the minimum basic pension from 54% to 70%, and the maximum pension from 100% to 120% from January 2023 to 2027.
Mainstreaming of retirement annuity
After the launch of deferred retirement annuity and a strong decrease in the sufficiency threshold of savings in the UAPF for concluding RA, Kazakhstanis began to more actively conclude agreements with LICs. This is also due to retirement-age increase (as of 2023, women officially retire at 61, and men at 63). However, as of 2021, under the deferred retirement annuity terms, Kazakhstanis can enter into contracts with LICs from the age of 45, and start receiving pension payments from the age of 55.
According to the National Bank of the Republic of Kazakhstan, over the past 10 years in Kazakhstan the premiums on retirement annuities have grown by 327%. Their amount was about 20.4 billion tenge in 2012, and 129.9 billion tenge in 2021.
Despite the popularity of retirement annuity, some Kazakhstanis are concerned that with regular devaluation and inflation, pension payments will be eventually very low in relation to the prices of goods and services, which periodically rise.
“Taking into account such factors, retirement annuity products with indexation to the dollar exchange rate began to appear on the market, retirement annuity with devaluation protection. The company makes regular payments throughout the life of the insured under the agreement. Since this is voluntary insurance, when choosing a life insurance company, it is recommended to pay attention to the guarantees that the company provides to ensure a lifelong pension, as well as to availability of the LIC financial solvency rating and the license by the National Bank of the Republic of Kazakhstan to carry out activities,” experts of LIC Freedom Life explained.
Photos are from open sources.