Kazakhstan Proposes Changes to Structure of Pension Contributions

Kazakhstan is considering changing the mechanism of mandatory pension contributions by employers, Orda.kz reports.

This was announced by Zhanat Kurmanov, Chairman of the Board of JSC "UAPF".

According to him, it is proposed to distribute 5% of contributions as follows:

• 4% should be directed to individual pension accounts of citizens
• 1% — to the common (solidarity) account

This proposal is very promising in our opinion. In recent years, we have been carefully examining this proposal together with state bodies, the National Bank, the Ministry of Labor, and the AFM. What problem can this proposal solve? Pension savings, no matter how large, are still exhaustible – after the age of 80, a person effectively relies only on the state component of the pension. And the income replacement ratio drops significantly. International practice pays great attention to this, because after age 80, as a rule, people's need for a stable pension income increases.he said in the Senate. 

The new scheme assumes that funds from the 1% common account will make it possible to ensure continuous payments of the funded pension even after individual savings are exhausted.

The UAPF believes that this approach will help maintain a more stable level of pension income in old age and bring the system closer to international practice, where special attention is paid to the financial stability of citizens after age 80.

Original author: Ilya Astakhov

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