Choose your own way of receiving pension payments
The pension system in Kazakhstan provides depositors (recipients) with more and more opportunities to participate in the planning of pension capital and their material security after retirement. A competitive environment is being formed in the field of asset management with the possibility of their transfer by the investment portfolio manager (IPM) and the choice of different investment strategies. Provided that pension savings are sufficient, it is possible to use them to improve housing conditions or treatment before retirement age. The most far-sighted depositors (recipients) when forming their future pension, in addition to mandatory types of contributions, add voluntary ones.
Today depositors (recipients) UAPF can choose different sources of payments due to an alternative type of pension provision - a pension annuity offered by insurance organizations. Pension annuity is a financial insurance instrument that allows UAPF depositors to receive a "pension" before the due date, but subject to the sufficiency of pension savings. Along with pension payments from the UAPF, it is intended to pay for needs after completion of employment, when other sources of income may not be available.
The sufficiency of pension savings is determined by the terms of the pension annuity agreement with the insurance company, which we recommend that you read carefully when deciding on the transfer of pension savings. When concluding a pension annuity agreement with an insurance company, their pension savings are transferred from the UAPF to the selected company in accordance with the procedure established by law.
In order to increase the availability of pension annuities, amendments were made to the legislation in February 2023, according to which the minimum rate of indexation of payments increased from 5% to 7%, and the maximum rate of return from 6% to 9%. Also, as part of the new changes, the average life expectancy of people with disabilities and those working in harmful and dangerous working conditions was taken into account.
In addition, there is an opportunity to use the so-called "deferred" pension annuity from the age of 45, but payments on it can be received from the age of 55. At the same time, persons with at least 5 years of work experience in harmful working conditions can purchase such an annuity from the age of 40, but with payments from the age of 50.
Since 2022, another pension provision tool has appeared – a joint (or family) annuity. A joint pension annuity for married couples and close relatives is an insurance product that provides an opportunity to combine their savings and receive lifetime payments without waiting for official retirement. For example, married couples can use it if one spouse does not have enough pension savings to purchase a pension annuity, and the second has a surplus.
Note that if the depositor has transferred all pension savings from the UAPF to the insurance company and pension contributions to the UAPF are not made in the future, then payments from the Fund will not be made from the moment of reaching retirement age. Kazakhstanis who have a surplus in the UAPF account will be able to receive both an insurance payment from the insurer and a pension from the UAPF in the future.
Features of the annuity:
• it is possible to receive pension payments before the official retirement age;
• payments are made until the end of life, even if their amount exceeds the amount of savings transferred to the insurance company;
• every year the pension amount is indexed by 7%;
• the recipient of insurance payments when buying a pension annuity transfers the ownership rights of savings to the insurance company, that is, he will not be able to use them for alternative needs, withdraw them when moving to another country for permanent residence, in case of his death, relatives will not be able to inherit the savings. However, within the framework of the pension annuity agreement, it is possible to provide for a guaranteed period of pension payments, during which certain payments will be transferred first to the recipient, and in the event of his death – to the heirs. Thus, upon the retirement of the recipient of pension payments, monthly payments will be made to his heirs until the end of the guaranteed period. At the same time, the minimum amount for registration of a pension annuity in this case will be more.
• the amount of payments is clearly defined and known in advance.
Before deciding to transfer pension savings to an insurance company, we advise you to carefully analyze both proposed ways of receiving a pension: from the UAPF and through a pension annuity.
The calculation on the calculator on the UAPF website of the pension expected in the future from the Fund, as well as, for comparison, a possible insurance payment from an insurance company under a pension annuity agreement, can help in making a decision.
Since November 2022, Kazakhstanis have the right to partially refund money from the insurance company back to the UAPF. Persons who have concluded a pension annuity agreement have the right to apply to an insurance company no earlier than two years from the date of its conclusion with an application for changing the terms of the agreement in terms of reducing the amount of insurance payments and returning money to the UAPF. At the same time, an amount must remain in the insurance company that ensures for life the amount of the monthly insurance payment of at least 70% of the subsistence minimum effective on the date of amendments to the pension annuity agreement. Insurance organizations are obliged to transfer the amount of money to be refunded to the UAPF within 20 calendar days from the date of the insured's request.
If we talk about recent statistics, in 2022, 25.99 billion tenge was transferred from the UAPF to insurance organizations, the number of depositors (recipients) – 2 985. At the same time, the repayment of the redemption amount, that is, part of the savings that the insurance company returns upon early termination of the contract, amounted to 3.37 billion tenge to 493 depositors.
Since the beginning of 2023, as of May 1, 2023, the amount of transfers of pension savings to insurance organizations amounted to about 5.96 billion tenge. The repayment of the redemption amount is 3.43 billion tenge.
The UAPF was established on August 22, 2013 on the basis of JSC "NPF "GNPF". The founder and shareholder of the UAPF is the Government of the Republic of Kazakhstan represented by the State Property and Privatization Committee of the Ministry of Finance of the Republic of Kazakhstan. The trust management of pension assets of the UAPF is carried out by the National Bank of the Republic of Kazakhstan. Since January 1, 2016, the functions of developing proposals to improve the efficiency of pension assets management have been transferred to the National Fund Management Council. In accordance with the pension legislation, the UAPF attracts mandatory pension contributions, mandatory occupational pension contributions, voluntary pension contributions, pension payments, individual accounting of pension savings and payments, provides the depositor (recipient) with information on the status of his pension savings (more on www.enpf.kz )