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Not all retirement benefits are equal

The Kazakhstanis have the opportunity to retire earlier and get pension contributions for the rest of the life. Such an opportunity is provided by life insurance companies.
Not all retirement benefits are equal

Currently, the Kazakhstanis, who have pension savings, can get a retirement benefit in 2 ways:

1. According to a monthly schedule from the UAPF. Since 2018, it is has been possible to get money from the UAPF only by monthly tranches.

2. To enter into a contract with a life insurance company and buy a retirement annuity.

What does the retirement annuity mean?

It is a financial instrument providing you with the opportunity to get a retirement benefit prior to the retirement age reaching, provided that you have a sufficient amount of savings in the UAPF. The retirement annuity is executed just if there is the amount required for the contract on retirement savings account.

Men may transfer their retirement savings to insurance companies from 55 years old, and women - from 50 years old.

Annuity monthly payments are a “lifetime pension”.

How much does the “lifetime pension” cost according to insurance companies?

Previously, the insurance companies used to do their own calculations according to actuarians- statisticians working with forecasts and calculations.

The cost of the retirement annuity in Kazakhstan has amounted to KZT 10 mln. as a result. Such amount should be kept on the pension account if you want to receive pension savings earlier than you reach the retirement age and, at the same time, get a retirement benefit for life. In 2016, the annuity cost was a little over KZT 8 mln.

The retirement annuity can be bought from 7 companies focusing on life insurance based on a specific license from the National Bank. Only these specialized insurance entities are entitled to work with UAPF depositors and offer retirement annuities to them.

What is better: the UAPF or a retirement annuity?

Let's start with the most important thing, namely with guarantees. If you choose getting of a monthly retirement benefit at the UAPF, then you will have a government guarantee, since the state is responsible for its commitments.

If the retirement annuity from an insurance company is being chosen, then there is a problem. You transfer the accumulated funds from the UAPF to the company against lifetime pension agreement. But what if such private insurance company suddenly happens to be on the verge of bankruptcy? There are no guarantees that you will not lose savings.

But there is a piece of good news

The regulator, represented by the National Bank, together with representatives of insurance companies, has developed protection arrangements for retirement annuity holders.

Insurance companies want lifetime retirement benefits to be guaranteed, as well as deposits in banks.

The arrangements for guaranteeing will be implemented through the Insurance Benefits Guarantee Fund. In fact, these arrangements also work as the Deposit Insurance Fund for deposits in a bank. If a bank turns bankrupt, the Fund shall pay to depositors up to KZT 10 mln. of savings deposited with the bank.

Thus, customers of insurance companies will obtain a guarantee regarding their retirement benefit getting, even if the insurance company turns bankrupt.

These guarantee arrangements are already applicable regarding compulsory types of insurance and now market participants wish to stretch this blanket of public guarantees over the retirement annuities, as well.

After adopting of amendments to the legislation, the pension holders will have the opportunity to work with insurance companies more securely.


 Currently, 70% of pension holders, who are retiring now, have up to KZT 1 mln. on their savings accounts at the UAPF. Only 6% of pension holders have savings amounting to KZT 3 mln. or more.

Author: Botagoz Zhumanova, ex-member of Community Council of the UAPF, journalist.


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