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Benefits of Planned Pension

According to the National Bank report, following the results of ten months of this year, the portfolio of retirement annuities in contracts of life insurance companies increased by 7.6%. The total portfolio of LICs in this market segment amounted to 57.4 billion tenge and took 32% of total premiums. We will tell you about the benefits of retirement annuities here.
Benefits of Planned Pension

Retirement annuity is often referred to as “retirement plan” overseas. The main advantage of such insurance contracts is the ability to receive monthly annuity payments before reaching retirement age. “The advantage is that it is possible to receive pension earlier than the deadline specified by law. A person can work saving for retirement in the UAPF and receiving payments from the insurance company,” says Gulzhan Dzhaksymbetova, the Board Chairman of Centras Kommesk Life.

Another indisputable pro of retirement annuities is reduction of inflationary risks. For example, the UAPF does not index pensions, and insurance companies have their annuity payments index-linked annually. “Besides, the retirement annuity makes it possible to receive pension payments from three sources at once: upon reaching the retirement age (with employment history before 1998); annuity payments under agreement with insurance company and payments from the UAPF formed after the conclusion of the retirement annuity agreement until the moment of retirement,” explains Andrey Dzheksembayev, the Deputy Chairman of the Board of Halyk-
Life.

People receive such a pension for life. By the way, these contracts do not exclude heirs. “I would like to emphasize that unlike the UAPF, a life insurance company guarantees lifetime payments even if a person has exhausted the entire amount of his savings,” says Olga Maslova, the Deputy Chairman of the Board of LIC Eurasia. “Inserting of the guaranteed payment period option in the contract will allow the heirs of the policyholder or the person specified in the contract to receive insurance payments before its expiration”.

The guaranteed period is a term calculated from the start of contract, during which the annuity payments must be made, regardless of whether the person is dead or alive. “For instance, if the guaranteed period in the contract is 15 years, and three years after the retirement annuity contract conclusion the client is gone, the heirs specified in the document receive payments for another 12 years,” says Andrey Dzheksembayev.

How and when is it possible to buy a retirement annuity?

Retirement annuity is available for women from 51.5 years in 2020 (from 52 years old - in 2021), for men - from 55 years old with sufficient savings in the UAPF. For example, as of January 1, the minimum amount of savings in the UAPF for the weaker sex will be 16,060,836 tenge at the age of 52, for men - 11,984,613 tenge at the age of 55. “Retirement annuity should be sold only by full-time employees of life insurance companies; the sale through agents or intermediaries is prohibited by law. Make sure the retirement annuity sellers are employees of life insurance companies,” recommends Olga Maslova.

Also, the future client needs to get complete information about the life insurance company from the seller of this insurance product, since his well-being depends on its financial stability for decades to come. “The depositor also needs to know that the termination of the contract is possible only on his part and not earlier than two years from the date of its conclusion. The balance of the insurance premium (transferred savings) upon termination cannot be returned to the UAPF or client, but only transferred to another LIC if there is a new insurance contract,” Gulzhan Dzhaksymbetova clarifies.

By trusting funds to life insurers, a person usually does not take risks, but before concluding an agreement on additional pension with LIC, the experts advise to study its investment declaration in order to understand where exactly the company plans to invest the money you entrust it with.

The insurers are not required to disclose this information but they can do so.

Photos are from open sources.

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