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Mandatory professional pension contributions: how do they work?

To protect and compensate for the damage to health of people working in hazardous industries, the state has provided such a mechanism as mandatory professional pension contributions (MPPC). explains in detail how it works today.
Mandatory professional pension contributions: how do they work?

Such a support measure has been established by the government as of January 1, 2014. The MPPC are employer’s compensation for harmful working conditions, and the employer makes them at his own expense in favor of the employee. They make 5% of the employee’s monthly income. This money comes in as pension contributions, in tenge, no later than the 25th day of the month following the month the income is paid. If the company applies a special tax regime, it makes MPPC in order and time provided by the tax legislation of Kazakhstan.

Moreover, as of 2020, a conditionally accumulative component is to be introduced in Kazakhstan, i.e. the employer, from his own resources, will additionally pay all employees, regardless of place of work, 5% of their salary.

As of June 1, 2019, 492.6 thousand individual pension accounts (IPA) were registered on MPPC at the UAPF, where more than 216.6 billion tenge were accumulated.

The UAPF approved the pension agreement at the expense of MPPC (the contract of adhesion). It is signed by the employer (agent) and employee, and a special application for opening an individual pension account on MPPC is submitted. The contract comes into force on the day the UAPF receives an electronic notification from the Government-to-Citizens State Corporation on entering information about the MPPC pension agreement into the unified list of individuals who have entered into the pension agreement based on mandatory pension contributions, MPPC.

If an employee has a previously signed pension agreement based on MPPC, he and a new agent sign a statement of accession to the pension agreement based on MPPC in the UAPF special form. In this case, the new MPPC account is not opened.

The following agents are exempt from paying MPPC to the UAPF:

- Individuals that reached retirement;

- Military personnel, special state and law enforcement employees who have been conferred special ranks, class ranks, as well as persons whose rights to have special ranks, ranks and wear uniforms were abolished as of January 1, 2012;

- Payees of pension payments for long service.

If the employer fails to transfer the MPPC to the employee’s IPA in time (subject to actual payment and receipt of income by the employee), the tax authorities will charge the employer the MPPC and penalty in the amount of 1.25 times the official refinancing rate set by the authorized body for each day overdue.

Thus, working in hazardous industries approved by the Government of the Republic of Kazakhstan, people are protected by the state and have the right to rely on adequate payments after entering the well-earned rest.

Thus, the following people have right to receive pension payments from the UAPF at the expense of MPPC:

- People who reached the age of fifty, for whom the MPPC were paid in total not less than 60 calendar months, by concluding a pension annuity contract with an insurance organization with sufficient savings to ensure payment not less than the minimum pension amount;

- Upon the occurrence of the conditions stipulated by Clause 1 of Article 11 of the Law of the Republic of Kazakhstan “On Pension Provision in the Republic of Kazakhstan”;

- Disabled persons of group I and II if the disability is established indefinitely;

- Foreigners or stateless persons that left for permanent residence abroad and submitted documents specified by the country legislation confirming the fact of departure.

It is important to know!

Considering that pension savings formed with MPPC in UAPF began to form, as mentioned above, only since 2014, respectively, persons who reached the age of 50, belonging to workers engaged in hazardous working conditions, were able to use the right to early receipt of pension savings from UAPF by entering into a pension annuity contract with an insurance organization only from 2019.

It should be noted that in case of insufficiency of pension savings formed on MPPC, the depositor (payee) has the right to use pension savings based on compulsory pension contributions and vice versa, and if available, pension savings formed with voluntary pension contributions to conclude a pension annuity contract.

Thus, having concluded a pension annuity contract with an insurance organization, it is possible to receive monthly life insurance payments from the insurance organization ahead of schedule. The pension calculator on website in the Electronic Services - Pension Calculator section can help calculate the amount sufficient for transfer to the insurance company.


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