Information material on the modernization of the pension system of the RK
The goals and features of the modernization of the pension system:
1. Ensuring that pension payments are consistent with previous income and rising living standards in the country.
2. Ensuring financial stability of the pension system (constant matching of current income and reserves generated from pension contributions, as well as budgetary funds and other income to expenses for the payment of pensions).
Modernization will be carried out while maintaining a multi-level pension system. The necessary and interconnected changes will be carried out at a basic level, mandatory - in the joint and funded components, and voluntary.
What groups of the population and pensioners will the upcoming transformations be directed to?
The peculiarity of pension provision issues is that they concern everyone and everyone: those who are pensioners today, and those who still need to earn their right to retirement; men and women; employed and unemployed, civilians and military, etc.
Proceeding from this, the forthcoming transformations will be carried out in the interests of the individual, assuming the division of responsibility for proper provision in old age between the state, employers and citizens directly.
Directions of modernization:
1. Institutional transformations of the current funded pension system, features of the organization and activities of the Unified funded pension fund.
2. Transfer of voluntary professional pension contributions to mandatory professional pension contributions
3. The phased increase in the retirement age of women from 2018
The pension model in the Republic of Kazakhstan, its main components
Today, Kazakhstan has a multi-level pension system, which consists of basic, mandatory and voluntary levels.
At the basic level, persons who have reached retirement age (taking into account participation in the joint (until 01.01.1998) and funded pension system) are paid the basic pension payment (BPV). It is established in a uniform amount for all, regardless of seniority and previously received income.
For reference: the number of recipients of BPV as of July 1, 2013 was 1833.5 thousand people, of which about 830 thousand people. - members of the joint, about 1 million people. - a mixed (joint and funded) pension system. The size of BPV in 2013 is KZT 9,330 or 50% of the PM.
At the mandatory level, pensioners are paid solidary (labor) pensions from the state budget and funded pensions through financing of accumulative pension funds in Kazakhstan.
When switching to a funded pension system in 1998, citizens retained the right to receive joint pensions from the state budget, provided they have at least 6 months of work experience as of 01/01/1998 and wages for any 3 consecutive years since 1995 of the year. The length of employment required for a full pension is 20 years for women and 25 years for men.
Pensions from the funded pension system are paid to participants of the funded system who made mandatory pension contributions in the amount of 10% of the salary.
The right is provided for women from 50 years old, and men from 55 years old to receive pension savings earlier, if her pension savings are sufficient for a monthly pension payment in the amount not lower than its minimum amount for 18 years after retirement by purchasing a pension annuity with transferring their pension savings to an annuity (insurance) company.
I. Creation of a unified funded pension fund (UAPF) and increased efficiency of the funded pension system
On August 1 2013, the Unified Accumulative Pension Fund (UAPF) was created, its founder and shareholder is the Government of the Republic of Kazakhstan.
The purpose and advantages of creating the UAPF:
• ensuring proper accounting of income of mandatory pension contributions (OPV) and the use of pension assets;
• improving investment strategies and increasing the return on pension assets, reducing administrative expenses;
• ensuring greater transparency in the formation and movement of pension savings.
The UAPF is the legal successor to all existing pension agreements and accumulates all pension assets that were previously distributed between private accumulative pension funds.
Transfer of individual pension accounts of depositors and their pension savings from pension funds in September of this year according to the schedule, it will be implemented in full with the preservation of the right of investors to their pension savings, which is very important!
UAPF main objectives:
• Attraction of compulsory pension contributions, compulsory occupational pension contributions (ATPV) and, when choosing a contributor, voluntary pension contributions (DPV);
• accounting of individual pension accounts of depositors;
• making pension payments to depositors through accumulated pension savings,
• ensuring high profitability of pension savings,
• expansion of coverage by NPS participants,
• increasing financial literacy by informing the public about the flow of funds on IPS
The UAPF pension assets will be managed by the National Bank of Kazakhstan.
To organize investment, the National Bank of the Republic of Kazakhstan will have the right to choose the organizations that manage investment portfolios in accordance with the investment strategy. But the investment strategy and recommendations on the list of authorized financial instruments for placement of UAPF pension assets will be approved by the UAPF Pension Asset Management Council under the President of the RK.
Its personnel and its regulations are approved by the President of the RK. The Council will include representatives of the Administration of the President of the RK, the Government of the RK, the National Bank of the RK, participants in the financial market and domestic independent experts.
The main functions of the Council will be:
• consideration and development of proposals to improve the management of the Fund’s pension assets;
• development of proposals on the list of permitted instruments for placement of the Fund’s pension assets and approval of this list;
• approval of the investment strategy of the Fund.
For compulsory pension contributions, compulsory professional pension contributions, the state guarantee on the safety of pension accumulations will be preserved.
Thus, the responsibility of the state for the safety of pension assets and ensuring investment returns will be increased.
II. Transition from voluntary to compulsory professional pension contributions
Transformations in this direction of pension system modernization are related to the fact that the current model does not compensate for the risks associated with employment in special working conditions.
It is appropriate to note that the voluntary professional pension scheme for persons employed in harmful working conditions has not been properly developed. It was assumed that it will provide an increase in pension savings through voluntary professional pension contributions (DAP) and will allow retirement at 53–55 years. However, at present more than 4 thousand people are participants in the system, and their accumulation is only not much more than KZT 100 million.
Given the specifics of the work of people working in special working conditions, from January 1, 2014, a transition will be made to mandatory professional pension contributions (PPS).
This means that individual pension accounts of specialists working in harmful working conditions will receive 15% of pension contributions, of which 10% of OPV from the wage fund of the employee himself and 5% from the employer. This will allow, with their continuous participation in the system (at least 30 years) and regular deduction (12 times a year), sufficient pension savings for early retirement.
At the same time, the burden on the employer will not increase, since the amount of contributions to the professional pension system will be taken into account when deducting taxes.
In addition, for this category of persons, the following will be saved:
1) payment of basic pension;
2) a joint (labor) pension in the presence of seniority on January 1, 1998 for at least 6 months;
3) insurance payments from the State Social Insurance Fund, in case of loss of general working capacity before reaching the generally established retirement age;
4) lifelong insurance payments from insurance companies in case of disability from work injury and occupational diseases.
Today, work has been completed on the preparation of the List of productions, works, and occupations of workers for whose benefit, depositors of compulsory professional pension contributions will use their own funds to make compulsory professional pension contributions.
The final version of the draft List contains 17 sections - types of production and over three thousand positions with the names of professions, positions and wordings uniting them.
Mandatory professional pension contributions apply to workers whose work in harmful, dangerous conditions is confirmed by the certification of production facilities under working conditions, the procedure for which is determined by the Government of the country.
Certification of production facilities according to working conditions is carried out by 146 specialized organizations. These organizations must be accredited by the authorized state body for labor for the right to provide certification services for production facilities.
Quality control of certification of production facilities under working conditions is carried out by state labor inspectors.
Thus, the proposed measures will strengthen the stability of the pension system and increase the adequacy of the level of pension provision to a growing standard of living in the country.III. Raising the retirement age of women
The increase in the retirement age of women is associated with a decrease in the work experience as of January 1 1998. More than 12% of women who applied for a pension in 2012 no longer had the full work experience accumulated on January 1 1998, and by 2018 all retiring women will not have full work experience.
This means that the pension for women retiring after 2018 will include:
• basic pension,
• joint (labor) pension from the state budget, corresponding to the length of service until January 1, 1998. Moreover, over time, the size of labor pensions may become lower than the minimum pension amount established annually due to part-time work experience,
• funded pension from a funded pension system in a relatively small amount corresponding to pension savings.
According to forecasts, the size of women's pensions will be less than 40% of the previous average monthly salary already in this decade.
Under such conditions, unification of the retirement age is proposed not to save budgetary funds, but to increase the length of service for women in the funded pension system and to increase the amount of pension savings, which, accordingly, should lead to an increase in the amount of received pensions from the NPS.
Adaptation of pension systems to an aging population by increasing the retirement age is currently being used or planned to be used by many foreign countries (Great Britain, Germany, France, Norway, Sweden, South Korea, Czech Republic, Azerbaijan, Ukraine, Estonia, etc.).
Moreover, in 18 countries of the European Union the retirement age of women is equalized with the retirement age of men by 2020, five states plan to do this later.
In accordance with international practice and Kazakhstan's experience, which was implemented from 1996 to 2001, it is proposed to increase the retirement age gradually, over a period of 10 years, increasing the retirement age by 6 months annually, starting January 1 2018.
This will allow:
• firstly, to carry out it painlessly for persons of pre-retirement age. For example, women who have reached 58 years of age will retire at 58.5 years, that is, after 6 months, to whom 57 years, then in a year or at 59 years;
• secondly, psychologically prepare and adapt to new conditions (for generations who will retire at 63 years old);
• Third, take measures to expand productive employment opportunities for women.
But again we draw attention to the fact that this whole model, according to the instruction of the Head of State, will begin to operate in 5 years - in 2018, painlessly and thoroughly taking into account all social specifics.
Since the assignment of pensions from the joint system will be carried out until 2043, unification of the retirement age will concern women who are participants in both the joint and funded pension systems.
Raising the retirement age, the Government understood that additional measures were needed to ensure employment of the population, and, above all, middle-aged women.
This will be facilitated by the State Employment Roadmap 2020, aimed at promoting productive employment and increasing labor incomes, within which women are assigned to target groups with a priority right to assistance in finding employment and other forms of social support. This program is a logical continuation of the implementation of the roadmaps of 2009 and 2010 and the Employment Program 2020.
The program determines the priority promotion of the employment of women and youth. In order to ensure women's competitiveness in the labor market, under the Employment Roadmap, they are given the opportunity to:
• free training in specialties in demand on the market, referral to social jobs subsidized by the state, youth practice. Moreover, for the period of study they are provided with material assistance for travel and accommodation, scholarships;
• opening or expanding one’s own business through microcredit and training in the basics of entrepreneurship;
• the implementation of voluntary relocation to settlements with a high potential for socio-economic development, where there is a need for labor resources. Such families will be assisted in finding employment at a new place of residence, in providing official housing and providing subsidies for relocation.
From 2011 to the present day, more than 100 thousand women have been covered by the measures of the Program.
Facilitating the adaptation of women to the labor market after leaving parental leave. In order to increase competitiveness, employment centers, in accordance with labor legislation, provide advanced training, if necessary, retraining and obtaining a new specialty in demand at the expense of the state budget.
A number of measures are envisaged aimed at the widespread use of female labor, the use of distance employment, the development of home-based labor, and the development of entrepreneurship for women.
In addition, amendments were made to the Labor Code to strengthen guarantees aimed at eliminating discrimination in employment and maintaining employment for people over 55, as well as imposing fines for posting job vacancies containing discriminatory labor requirements (designation gender and age).
However, the right to early retirement will be reserved for women with seniority until January 1 1998
- at 53 years old, women who have given birth (adopted, adopted) 5 or more children and raised them up to eight years of age with a working experience of at least six months before January 1 1998;
Also, the period of care of the unemployed mother for young children, but not more than until each child reaches the age of 3 years, within 12 years in total, is counted in the seniority.
- at 45, with a total experience of at least 20 years, women living in areas of extreme and maximum radiation risk from August 29 1949 to July 5 1963, at least 5 years, in accordance with the SAM “On the social protection of citizens affected by nuclear tests at the Semipalatinsk nuclear test site. "
- for participants in the funded pension system with sufficient pension savings, the right to assign pension payments from the NPS at 50 years will be retained.
IV. Expanding coverage of the funded pension system
The current level of participation of the able-bodied population of Kazakhstan in the funded pension system is 67.7%, of which about 98% are employees.
Therefore, proposals are being considered to increase the attractiveness of NPS, formalize labor relations of shadow workers and expand the coverage of self-employed people with funded pension system services.
The bulk of self-employed citizens pays pension contributions within 10% of the minimum wage.
If you make simple calculations, you can calculate how much savings a citizen will have for 35 years of making such contributions: annually a person will accumulate no more than KZT 23 thousand (if you take 2013), respectively, for 35 years of accumulation they will amount to 42 minimum wages.
Such savings will be enough to pay pensions in the amount of the minimum wage, for only 3.5 years.
If the self-employed do not participate in the pension system, then upon reaching retirement age they will receive social benefits by age, in the amount of not more than 50% of the cost of living, which is only KZT 9330 according to the example of 2013.
To solve this problem, the following is planned:
• taking into account the measures taken to clarify the status of the self-employed and their involvement in productive employment (within the framework of the “Employment Roadmap 2020”), a requirement will be introduced on the mandatory participation in the funded pension system of persons who have received the status of a self-employed population;
• the order of payment of contributions will be changed; the self-employed population will have to show all their income, and pay pension contributions from this amount.
• The system of minimum guarantees will change.
Instructions of the President of the Republic of Kazakhstan on the development of a package of measures to further modernize the pension system until 2030
Taking into account the instructions of the President of the Republic of Kazakhstan, voiced in an appeal to the people of Kazakhstan dated June 7 2013, a package of measures will be developed to further modernize the pension system until 2030, providing for the joint responsibility of the state, employer and employee for the level of social protection of the population, namely:
A) state subsidizing of mandatory pension contributions for working women during their stay on maternity leave and childcare.
The presence of women on parental leave, on the one hand, interrupts the length of participation in the funded pension system, and on the other hand, objectively leads to a relative (compared with men) lag in the amount of pension savings.
Calculations show that even with the deduction of compulsory pension contributions from social payments made for participants of compulsory social insurance (caring for a child until he reaches the age of one year), the amount of accumulations during the period of stay on maternity leave (according to the Law - 3 years ) is relatively reduced by 2.5 times.
Updated date: 10-10-2019 10:21