The possibility of providing financial support to older people who have stopped working due to old age has become relevant in recent years not only in the CIS countries. Increasingly, questions are being raised about raising the age of receiving state payments and the need to modernize the system in a particular state. The question of what kind of pension is in Kazakhstan is of interest to citizens also because this republic was the first among the post-Soviet states to raise its age and carry out a radical reform.
the USSR
Kazakhstan inherited from the Soviet Union a joint pension system with incredibly generous payments at that time. The replacement rate was 75% of wages at the last job with full experience. For each year of the working period in excess of the statutory period, it increased by one percent. The maximum size of the retirement pension was limited to 132 rubles.
The retirement age, which has remained unchanged since 1932, was 55 years for women and 60 years for men. In addition, the system provided for a number of preferential categories of workers who had the right to early processing of payments. There was a large group of elderly people who received a personal pension that exceeded the maximum labor three or more times. In case of insufficient work experience, an amount in the amount of the minimum wage was paid.
The pension system of the Soviet Union began to experience financial difficulties in the early nineties, when oil prices began to fall on the international market. In 1986, after the adoption of the law on individual labor activity, the situation became even more pitiable.
Kazakhstan on the eve of pension reform
By the time of the collapse of the Soviet Union, the demographic situation in Kazakhstan was at a critical point. An increase in the number of elderly people, a decrease in the birth rate, the emigration of the able-bodied population, combined with weak indicators of the economy, unemployment, underemployment and informal employment, and an acute budget deficit led to the need to urgently reform the pension system.
In the conditions of the economic collapse of those years, it was an extremely unpopular and revolutionary measure for its time.
1998 reform
The prototype of the Kazakhstan pension model was chosen Chilean, while maintaining a solidarity system for the transitional period. The reform motto of that period can be summarized as follows: "Work longer, spend less, save more."
Three levels of the system have formed:
- obligatory state joint and several - for the minimum provision of pensioners;
- accumulative pension - with mandatory deductions from wages and maintaining individual accounts in the management of private pension funds;
- voluntary funded - with the maintenance of individual accounts in the management of the same funds.
Then, for the first time in the post-Soviet space, the retirement age increased: in stages, six months over a six-year period, to 58 for women and 63 for men.
The right to early termination of work (five years earlier) was reserved for those affected by nuclear tests at the Semipalatinsk test site, and women who gave birth and raised five children.
The minimum pension in Kazakhstan was set at 2,440 tenge.
A basic level of
In 2005, a universal and unconditional payment was introduced, called social, which was paid in equal amounts to all retirees held and was not dependent on seniority and salary.This type of pension in Kazakhstan, as well as in Russia, is intended for the most vulnerable sections of the population. Its size is determined as a percentage of the cost of living. In 2005, the rate of 40% was used for calculation, which in monetary terms amounted to 3,000 tenge (23 dollars).
The basic pension payment increases annually by an average of 5% and depends on the size of the subsistence minimum established by the budget for the current year. De facto is inflation indexation.
In 2011, the size of the basic pension was increased to 50% of the subsistence level.
Since 2005, the size of the payment from the state budget has consisted of two components: the basic pension payment and the joint payment received by citizens of Kazakhstan who had at least six months work experience as of January 1, 1998.
Regulation and sources of funding
The minimum pension in Kazakhstan is established annually at the government level, like all other indicators. In 1998, it amounted to 2,440 tenge. ($ 19.7).
The source of financing state payments, including pensions for people with disabilities, in Kazakhstan is the social tax that is levied on all business entities. Rates and tax base have been repeatedly reviewed by the government. The record high level of 33% of the payroll at the end of the 20th century by 2018 fell to 9.5%.
The idea of a funded pension system
When presenting the system, in which there was a fair share of populism, it was planned that for forty years of labor activity with a monthly deduction of 10% of wages and the level of investment income within 8-10% per annum, taking into account the method chosen by public servants, the amount in the individual account of the depositor will be sufficient to ensure a decent standard of living in old age. And if we add to these 10% also voluntary contributions that citizens will pay, then life will become better.
However, voluntary contributions, despite the individual income tax exemption, the population was in no hurry to transfer to the financial organization formed soon.
Initially, one private foundation was created. By 2013, there were more than ten of them on the Kazakhstan market. All of them had the status of non-state. The requirements for obtaining licenses were strict, since the task of the funds was not only to accumulate funds, but also to invest them in profitable market assets with the subsequent distribution of funds to citizens' accounts. The National Bank of the Republic of Kazakhstan became the regulator of the activities of private pension funds.
Savings system - realities
As it turned out over time, it is not so much the system model that matters, but the conditions in which it is implemented. The measures taken did not allow investments in a number of market instruments, but contained recommendations on investing funds in the economy of Kazakhstan. This is logical and understandable, because the main function of the National Bank is to ensure the stability of the currency and economy of the country. Under such conditions of investing pension assets, the government gained access to a source of financing for long-term projects.
Ineffective policies of pension funds, galloping inflation, commissions of savings funds and asset management companies in a situation of economic instability could not ensure profitability even at the inflation level. Some funds were unprofitable. Kazakhstan was faced with the need to pay compensation to depositors in accordance with the state guarantee of retirement savings declared at the start of the reform.
In 2008, amendments were made at the legislative level and a Decree of May 15, 2009 was signed that regulates the methodology for calculating and paying state guarantees to recipients of funded pensions in Kazakhstan.
Such a regulatory framework actually created a payback system for ineffective management in private pension funds.Undoubtedly friendly to people, it did not solve the problems of inefficient management of pension assets of citizens, but created an additional burden on the budget of the republic.
The amount of the state guarantee, popularly called "inflationary" funds, is paid at a time when applying for a pension. Its size depends on the duration of participation in the funded system, the amount of savings and varies widely.
Pension reform in 2013
It was decided to create the Unified Accumulative Pension Fund (UAPF), the sole shareholder and founder of which is the Government of the Republic of Kazakhstan. With all the shortcomings of public administration, this is an obvious plus: such an owner will not care about getting the maximum profit here and now, since bankruptcy will completely destroy the country's economy.
Today the fund is a single administrator and operator of all financial and information flows of the funded pension system. All previously operating organizations in this area have been liquidated, assets and liabilities transferred to the UAPF, which at the end of 2018 amounted to about 10 trillion tenge.
The National Bank of Kazakhstan is engaged in investment management of funds. The UAPF fund policy regarding investment is focused on infrastructure projects, therefore, high returns should not be expected.
The creation of a monopolist organization in the pension asset management market was explained by a reduction in administrative expenses and the possibility of more efficient management.
Since March 2014, funds paid by the employer at a rate of 5% of the wage fund have been added to mandatory pension contributions. The exact name of this tax is the professional component of the funded pension system with mandatory contributions for employees in high-risk professions.
Retirement age increase in 2018 - only for beautiful ladies
Since January 2018, Kazakhstan has again raised the bar for a possible cessation of work. This time only for women, in stages, half a year over the next ten years. Since 2027, both men and women will receive the right to retirement benefits upon reaching 63 years of age. There is no gender discrimination or male chauvinism, but only an accurate calculation based on statistical data: in the republic, the average life expectancy of men is 67.5 years, which is 9 years less than that of the fair sex.
In 2019, women in Kazakhstan will retire at the age of 59. In 2020, this age will be 59.5 years, etc.
Pension increase in Kazakhstan
The jubilee twentieth year of the reform of the system is marked by another significant event. Since July 1, 2018, the methodology for calculating pensions in Kazakhstan has changed. Now the social or basic payment is not calculated as a percentage of the subsistence level, but depends on the total length of service. With an experience of 10 years or less, its size is 54% of the cost of living. For each year of service over ten years, its size increases by two percent. The maximum payout is 100% of the subsistence minimum.
Full calculation of pension in Kazakhstan
It takes into account the established basic and estimated budget indicators for 2019. It is enough to simply calculate how much a pension in Kazakhstan is in monetary terms.
- The minimum joint pension is 36,108 tenge.
- Minimum social - 16 037 tenge.
- The amount of pension payments from UAPF in 2019 is 16,037 tenge.
Summing up the numbers, we get the total amount of 68,182 tenge.
Since the secret of pension savings is protected by law, information on the maximum pension is not available.