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It is socially unsafe to apply the Singaporean experience of the pension system in Kazakhstan

Various proposals on reforming the pension system of the Republic of Kazakhstan have been heatedly discussed recently. The Singaporean model is most often mentioned as an example of savings and their use. One of the advantages of the Singaporean model is fund withdrawal for the purchase of housing or tuition fee, writes RANKING.KZ.
It is socially unsafe to apply the Singaporean experience of the pension system in Kazakhstan

There are proposals to combine all pension and social contributions of Kazakhstanis into a single fund, following the example of this country. It is worth noting that the Singaporean model has serious shortcomings: for example, there are no basic and joint components provided by the state budget in this pension system. Ensuring the minimum standard of pension for citizens by the state is extremely important; as the state should protect those pensioners who could not save for retirement for different reasons: did not make regular contributions or made contributions from small incomes, from poverty. Within the framework of the social policy in Kazakhstan, 2.6 trillion tenge were allocated from the state budget for social assistance and social security for just nine months of this year.

It is difficult and socially unsafe to fully apply the Singaporean experience in our country, since the level of economic development and labor income of people in Singapore differs from Kazakhstan. Only pension savings are accumulated in individual pension accounts and the property of depositors in Kazakhstan. Other social contributions are transferred to the country's budget (social tax) and the system of social and medical insurance funds (GFSS and FSMS). People in Singapore are obliged to accumulate savings for all occasions associated with social risks: retirement, housing, education, health, relying solely on their own savings and not the state. Another difference between the Singaporean and Kazakhstani systems is the population’s age and standard of living. The accumulation pension system of Singapore has been operating for over 60 years (since 1955), while the local system has only turned 20 years old (since 1998) in 2018. Thus, the savings of residents of the island state are much higher than domestic. For example, by the end of this September the amount of savings in the Singapore Central Provident Fund (CPF) amounted to 417.5 billion US dollars, while in Kazakhstan in the same period it was only 27 billion US dollars (10.4 trillion tenge). The average size of savings per depositor in Singapore is 105.4 thousand US dollars, in the Republic of Kazakhstan - 2.6 thousand US dollars.

The saving amounts in Singapore are much higher not only due to high incomes of the population, but also higher deductions, that is, the load on the payroll budget in Singapore is much higher. The monthly contribution of an employee and employer in Singapore averages 37% of an employee’s salary, while in Kazakhstan the contribution to the UAPF is only 10% of an employee’s salary. The average salary in Singapore is approximately 5,596 Singapore dollars, or 4,096 US dollars, while in Kazakhstan in the third quarter of this year the average salary is 191.1 thousand tenge, or 495.4 US dollars.

Let us remind you that according to the World Bank, Singapore's GDP as of end of 2018 amounted to 364.2 billion US dollars, and GDP of Kazakhstan - 170.5 billion US dollars. Singapore took the first place in the global competitiveness index, while Kazakhstan ranked 55th. Due to the high standard of wages and the corresponding contributions to CPF in Singapore, the level of accumulations is high; it allows using part of the savings for other purposes. It will be very difficult to adopt the experience of Singapore at the moment. In order for our pension system to work according to the Singaporean model, we will have to revise the multi-level system of social and medical insurance and increase the size of pension contributions several times ensuring the coverage of all social risks that will be a heavy load on the wage fund and cause dissatisfaction among investors and employers.

Source: http://www.ranking.kz/ru/a/infopovody/primenyat-singapurskij-opyt-pensionnoj-sistemy-v-kazahstane-socialno-nebezopasno

Photos are from open sources.

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