The question is not rhetorical. Especially in the light of recent events, when increased instability in the financial markets associated with the COVID-19 coronavirus, changes in the exchange rate, oil prices and other factors affected the change in investment income, when passions were boiling over the payment of state benefits for loss of income due to quarantine in the amount of 42,500 tenge, even the opinion was expressed that this money was taken from the UAPF. Zhanat Kurmanov, Chairman of the Management Board of UAPF JSC, made an explanation of the situation in the media at the end of April.
Today we want to focus readers' attention on the most important points concerning the pension savings of our citizens.
First, pension savings are the property of the depositor, and its safety is guaranteed by the state. No one can dispose of them without the will of the depositor, pay them to third parties or for other purposes.
Secondly, savings are continuously invested, i.e. they do not "lie", but "work" for the depositor. The National Bank of the Republic of Kazakhstan invests pension assets. The main principle of investing is their safety, i.e. minimizing the risks of their loss for any reason. Pension savings should grow in order to bring a stable profit and ensure a comfortable old age.
Third: an increasing part of all pension savings is investment income accrued to each depositor's account daily, and any depositor can "24/7" monitor their savings through the UAPF mobile application or their personal account on the UAPF website.
Now about all this in more detail.
Pension assets of depositors are under comprehensive control, and their safety is guaranteed by the state. This is the money of our citizens, set aside for old age, which can be obtained only under the conditions established by law.
All state benefits are paid from the state budget or extra-budgetary funds of the Government, and the funds in the UAPF do not belong to such. This is the personal money of depositors.
The UAPF Joint Stock Company itself is an authorized operator for collecting, processing, accounting and calculating pension savings and payments, providing pension services to the population, and the investment management of pension assets is carried out by the National Bank.
Pension assets are invested in various financial instruments in order to protect pension savings from inflation and ensure income above inflation.
When choosing financial instruments for investment, the National Bank strives for the maximum balance in the risk-return ratio. If the situation in the financial markets changes and the profitability of individual investment instruments decreases, then this is offset by the profitability of other instruments.
Each depositor has an individual pension account (IPS) in the UAPF, which takes into account all his incoming pension contributions, as well as the investment income received minus the commission fee established by law. The commission fee in 2020 is 2.0 percent of the investment income received and 0.011 percent per month of pension assets. This is 3.7 times and 2.3 times lower, respectively, than the norms established by law.
Despite the fact that pension savings are invested both inside Kazakhstan and on international markets, in assets and currencies of different countries, at the end of each day, the UAPF carries out a revaluation of citizens' savings. Investment income is accrued to the depositor daily and is available to him at the end of each day. Even if a person already receives pension payments from the UAPF, investment income continues to accrue on his savings. It depends on the amount of savings of each depositor and the profitability of financial instruments in which depositors' money is invested. In other words, investment income is distributed daily to depositors' accounts in proportion to their savings.
Let's see clearly, in numbers, how the calculation of investment income takes place. Let's start with the fact that it depends on the current value of the conditional unit of pension assets (UE) calculated by the UAPF for each day. The individual pension savings of each depositor themselves are taken into account in tenge and in the amount of UE.
The amount of UE on the depositor's IPS is calculated at each receipt of his pension contributions by dividing the amount of the received contribution by the current value of the UE. Let's look at a concrete example. Suppose a pension contribution of 10,000 tenge has been received to your IPS. With the cost of the UE, for example, on March 01, 2020 – 806.3948806, the amount of UE that will be credited to your IPS will be 10,000 tenge / 806.3948806= 12.4008724.
When calculating pension savings on a different date, for example, on May 01, 2020, taking into account the investment income received, the new current value of the UE is taken into account, for example, 835,2253117. The number of UES that were credited to your IPS is subject to revaluation at the new current value of the UE as follows: 12,4008724 * 835,2253117 = 10,357.52 tenge.
Thus, your pension savings as of May 01, 2020 will amount to 10,357.52 tenge, while pension savings in this example consist of a contribution amount of 10,000 tenge and investment income of 357.52 tenge. The increase in savings is associated with the accrual of investment income, which is reflected in the increase in the value of the asset.
The cost of UE is updated daily on the main page of the UAPF website www.enpf .kz
Thus, the amount of pension savings of each depositor depends on the amount of contributions and investment income, as well as on the timeliness and frequency of contributions. Therefore, it is important that contributions to the IPS are received regularly and in full.
As a result of investment activity and due to the volatility of foreign exchange rates, changes in the market value of financial instruments, the amount of accrued investment income may change daily. Therefore, it is more correct to give an assessment of investment management for a long period of investment (at least a year) and in the long term.
For example, over the past 2019, the net investment income accrued on the IPS of UAPF depositors amounted to 641.8 billion tenge, the yield was 6.57% with inflation of 5.4%. Thus, the real (above inflation) return on pension assets is positive.
Since the beginning of 2020, as of May 01, more than 536 billion tenge of investment income has already been accrued on depositors' IPS, which is 381.1 billion tenge more compared to the same period last year (154.9 billion tenge). This indicates that investment income is not a fixed amount, depending on the value of financial instruments and the situation in the financial market as a whole.
The Law on Pension Provision provides for a state guarantee of the safety of savings, in the amount of mandatory pension contributions actually made and mandatory occupational pension contributions, taking into account the inflation rate at the time the depositor receives the right to pension payments. The amount of pension savings depends on the amount of contributions, the frequency of their receipt and investment income.
Here is such a simple economics and mathematics, having understood which, each depositor will be able to figure out how his savings are growing, check what happens to them and whether they are not paid for their intended purpose.
To learn more about the figures for today, by month and year separately, with information on investment management of pension assets, as well as data on the structure of the investment portfolio in the context of financial instruments, you can monthly on the Fund's website in the section "Indicators" - "Investment activity" in the following subsections:
- "Investment Activity Review" https://www.enpf.kz/ru/indicators/invest/review.php
- "Structure of the investment portfolio of pension assets"
https://www.enpf.kz/ru/indicators/invest/structure.php