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The main advantages of the Keleshek program are named

Yelena Taytugoleva, Deputy Chairman of the Board of Nomad Life, has told why insurance products within the State Educational Savings System framework are one of the breakthrough solutions on the path to building an educated nation in Kazakhstan.
The main advantages of the Keleshek program are named

In his new message to the people of Kazakhstan, President Kassym-Jomart Tokayev ordered the development of an updated program of the Keleshek voluntary savings system. During the discussion of measures for its implementation, it was emphasized by the government that the share of school graduates covered by the state educational order would decrease due to increase in the birth rate, despite the growing number of state grants by 10%. Keleshek will be able to solve future problems with higher education: the state will contribute start-up capital of 60 MCI to children aged 5 years, and together with subsequent monthly contributions (from 1 MCI and higher depending on opportunities), guaranteed return on investment and the state premium (5-7% annually on the balance) by the 18th birthday, 3.3 million tenge will accumulate in the account.

With an increase in the monthly contribution from 1 to 3 MCI, the amount accumulated by the age of majority more than doubles to 7.7 million tenge. And, what is most remarkable, an insurance component is built in the financial product. In other words, if something unexpected happens to the parent making the savings (disability resulting in loss of labor capacity, or death), their children will still receive the required savings in full when they reach adulthood. Taking into account the fact that half of the children born in 2022 were at least the third indicating the growing large families in Kazakhstan, the new program will be a good help for their parents.

– Hello, Ms. Taytugoleva! Could you tell us about the advantages that endowment insurance for children's education provides compared to other saving methods for education?

– When concluding an agreement with a life insurance company within the framework of the existing State Educational Savings System (SESS), parents receive wider savings opportunities. There are several benefits. Firstly, it provides an investment return both in tenge and dollars. It conventionally reaches 8% in tenge for the entire saving period regardless of the base rate level. As for the dollar return, it is set at up to 4.1%, which is significantly higher than current bank rates capped at 1%.

The second important advantage is a state premium. It is accrued on the amount of savings within 5% per annum and up to 7% for certain segments of the population, such as orphans, persons with disabilities or children from large families.

The third important perk that, for example, an educational contribution cannot provide is the option for insurance coverage. In the event of loss of a parent or their loss of labor capacity and disability of groups I and II confirmation, the insurance company will pay contributions for its client. The funds will be paid in full upon reaching the term of insurance.

And the most crucial thing is financial guarantee. This function is assumed by the Insurance Payments Guarantee Fund, which covers the entire accumulated amount, while the Kazakhstan Deposit Insurance Fund (KDIF) insures educational deposits of only up to 20 million tenge.

In addition, the high school graduate will be able to choose the country of study, university and specialty. If the child receives a grant, the entire accumulated amount can be used at their own discretion, such as their post-graduate education, or transferred to sibling/relative’s account, or even spent on their own needs (buying a car, apartment, etc.).

– How will the new conditions of the program fundamentally differ from the existing insurance products within the SESS framework?

– The Keleshek program within the SESS framework is the first insurance product with the government subsidy, which can become an additional opportunity to provide citizens with access to different levels of education and allow more parents to save money for their children’s education. It is already known that the state, within the program framework, is working on an entry fee of 60 MCI (207,000 tenge) and 120 MCI (414,000 tenge) for the priority category of the population. To encourage savings, parents will need to make mandatory monthly contributions in the amount of 1-3 MCI (3,450-10,350 tenge). It is necessary to contribute no less than 12 MCI in a year in total, otherwise the starting educational capital will return to the budget.

In addition, an annual state premium (5-7%), LIC’s return on investment, will be accrued, and when the child turns 18, additional funds will be transferred from the National Fund. Thus, even with minimal contributions of 1 MCI per month, by the child’s 18th birthday, over 3.3 million tenge will be accumulated. By increasing parents' monthly contributions, it will be possible to save much more.

– How to determine the sufficient amount for children’s education in the future?

– The final amount (sum of accumulation) is mainly determined depending on the cost of education at the chosen university. For example, the tuition fee at KBTU for one year reaches 2.4 million tenge, while at the Kazakh-German University it is 1.5 million. If parents or children are considering universities abroad, they need to understand that they will have to pay for education in foreign currency. In this case, profitability can be increased by accumulating in dollars (investment return in LIC is up to 4.1% per annum).

In any case, parents need to understand that the higher the cost of education, the higher the monthly contributions should be.

– Will the program cover education at school or preschool organizations?

– It is now possible to save up only for vocational and higher education in Kazakhstan or abroad under the SES system.  Our government is planning to expand the program, and other types of educational organizations (preschool and secondary, additional education) may be included in it.

– What do parents need to know about the key conditions for insurance benefit payout when their children reach adulthood?

– After the child has chosen an educational organization and concluded an agreement with it, it is necessary to provide documents to the life insurance company with which the contract is concluded. Next, the insurance company will transfer the accumulated funds - the parents’ own funds, investment return earned on them, the state premium and start-up capital from the state - to the account of the selected university, regardless of whether it is domestic or foreign. It can be a lump-sum or periodic payment (for example, once a year or semester).

In case of grant winning the child gets to choose whether to keep the money for the post-graduate degree or transfer the savings to sibling, or even spend it on own needs (car, apartment, etc.).

– What are the types of risks and are they considered when assessing insurance payouts?

– When concluding an agreement with LIC under the SESS program, the company provides insurance coverage to the parent making the contributions. In the event of loss of a parent or their loss of labor capacity with the establishment of disability of group I or II, the company will pay the entire amount under the contract, regardless of the size and number of contributions made.

– If a child is insured for an amount exceeding the cost of education, what happens to the difference received?

– If a child wins a grant or enters university, the total cost of which is significantly lower than accumulated savings, the graduate gets to choose whether to keep the money for a post-graduate degree, or transfer the savings to sibling, or spend it on own needs (buying a car, apartment, etc.).

– Current insurance products within the SESS framework include tax benefits. Will they be in the new program?

– An agreement with LICs concluded within the SESS framework for a period of three years or more is subject to tax benefits - the policyholder can save 10% of the amount of all paid contributions on taxes (no more than 320 MCI per year). If a parent makes a monthly contribution of 20 thousand tenge, they return 10% of the contribution amount to their salary every month. The tax deduction from the personal income tax is applied at the parent’s place of work upon the insurance contract submission and confirmation of premium payment. Thus, for the policyholder, the personal income tax reduces and the amount of income received in hand (salary) rises.

– In what currency is it best to save?

– The savings under the SESS program can be formed in two currencies: in tenge - up to 8% for the entire period of savings and in dollars - up to 4.1%. When choosing a currency, it is necessary to carefully calculate everything, consider inflation and changes in the dollar exchange rate at the time of receipt. You must admit that it is difficult to predict the cost of education at the chosen university and how much a dollar will cost in 10 years. However, when choosing foreign exchange products, it is important to understand that the accumulation process will also be in foreign currency, which requires an adequate calculation of your future opportunities, since if the dollar strengthens, the size of premium will also be recalculated.

– Are there any extra options and coverages within existing and new programs?

– In fact, the program was developed specifically to make it easier for any citizen of our country to understand how to:

  • sign an agreement with LIC;
  • receive start-up capital;
  • pay a monthly premium;
  • receive the state premium;
  • receive the return on investment.

If anything happens to the parent, the child receives money for education under insurance agreement in full. Extra options and coverage are developed and provided by LIC in order to increase the product’s attractiveness; they may vary.

– Can any events or circumstances impact the insurance reimbursement?

– Nothing can affect the payment under the SESS program; the child will receive the amount in full, subject to the parent’s compliance with financial discipline in paying contributions, as long as the child’s account is replenished per year by at least 12 MCI, otherwise the starting capital will be withdrawn by the state.

– We live in a period of high turbulence. How are insurance companies responding to these changes and will they be able to influence endowment insurance in the future?

– SESS is an educational savings system in the first place, developed and subsidized by the state. If it is decided to change the conditions, we will be forced to take these changes into account. The insurance company will fulfill its obligations regarding the level of investment return regardless of changes in the economic situation and financial market conditions.

– What do you need to take out an insurance policy?

– The registration process in the SESS program is as simple as the program itself – one just has to bring the policyholder’s identity card, the child’s birth certificate to the life insurance company, decide on the amount required for education, fill out an application and sign the contract.

– When taking out endowment insurance under the SESS, companies do not indicate the state premium of 5% in the contract (in calculations). How is this aspect regulated?

– The governmental accruals are made annually. At the moment of the state premium accrual, the financial center being the operator of this state program, checks the status of the beneficiary’s family. As a standard, 5% of the state premium is accrued, but if the family has become large or the child is left an orphan or disabled, or the family’s per capita income has dropped, then a 7% premium will be accrued for this year.

That is why the state premium (its size) is not determined and set for the entire term of the insurance contract. Therefore, insurers do not fix its size in the contract, as it may change. The amount of state premium is established by law.

– How to properly integrate a new instrument into a family’s financial plan?

– As already mentioned, it all depends on the amount of savings - the higher the cost of education, the higher the monthly contributions should be. You can calculate the minimum amount to be transferred to the child’s account each month on the website or with the insurance company’s officer. Even with the minimum mandatory deduction (1-3 MCI), any child’s savings will range from 3.8 million to 6.8 million tenge by the age of 18, which is enough to get education at almost any domestic university.

– What recommendations could you give to parents who decided to purchase an endowment insurance policy?

– The only recommendation that allows accumulate the largest amount is to increase the amount of monthly premiums, observe the frequency of their payments and choose the savings currency. The total amount should be enough for the chosen education in the future.


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