The cumulative return on pension assets since the start of the funded pension system has exceeded cumulative inflation by 117.84%

The cumulative return on pension assets since the start of the funded pension system has exceeded cumulative inflation by 117.84%

The amount of pension savings of contributors to the Unified Accumulative Pension Fund as of April 1, 2022 reached 13.0 trillion tenge. As you know, this amount includes pension contributions of contributors and investment income.

The share of investment income in pension savings is growing every year. In general, the investment income provided by the National Bank since the merger of all pension assets into the UAPF amounted to 6.3 trillion tenge.

From January 1 to April 1, 2022, investment income amounted to about 295.8 billion tenge.

Since the beginning of the year, against the backdrop of the deterioration of the geopolitical situation, volatility has increased in the global financial and commodity markets, which has affected both the growth of inflation and the profitability of pension assets.

In March of this year, inflation in Kazakhstan reached its peak annual value since September 2016, accelerating to 12%. The greatest contribution to inflation was made by food products, the price growth for which accelerated to 15.4%. Prices for non-food goods and services also increased.

The profitability of pension assets changed due to market and currency revaluation of financial instruments, which since the beginning of the year has been both positive and negative in different periods.

Retirement savings are invested in financial instruments in different currencies. About 2/3 of investments are placed in tenge and about 1/3 - in foreign currency, most of foreign currency investments - in US dollars. Accordingly, the dollar exchange rate is reflected in investment income as part of pension assets: if the national currency strengthens, investment income may decrease, and if the dollar exchange rate rises, it can grow.

From January to the beginning of March 2022, the tenge depreciated against the US dollar from 431 tenge to 495 tenge and to 512 tenge. Thus, there was a positive currency revaluation of pension assets on a weekly basis. Contributors have seen significant positive investment returns in their individual retirement accounts. Then the national currency began to strengthen, the dollar exchange rate, respectively, to decline. As of April 1, it was 466 tenge per 1 dollar.

As a result, negative events in the financial markets and currency revaluation of assets had an impact on investment returns, which over the past 12 calendar months amounted to 10.43%, with inflation over the same period of 12.0%. Since the revaluation of pension assets is carried out weekly and on the last day of the month, contributors see changes in their statements.

It is worth emphasizing that pension savings are long-term investments and it is advisable to analyze the amount of investment income for a period of at least 1 (one) year. Short-term data (weekly, monthly, etc.) are not indicative, because subject to constant changes in market conditions.

For example, the amount of net investment income for the past 2021, distributed to the pension accounts of contributors (beneficiaries), amounted to about 1.4 trillion tenge, which exceeded the amount of contributions received during the year (1.3 trillion tenge). The yield on UAPF pension assets in 2021 managed by the National Bank of Kazakhstan since the beginning of the year amounted to 11.13%, with inflation of 8.4%.

The investment return from the day the funded pension system was founded (1998) as of April 1, 2022, on an accrual basis, amounted to 698.23%, with inflation for the entire period of 580.40%. Thus, the real (i.e., exceeding inflation) return on pension assets for the period from the start of the funded pension system until April 1, 2022 amounted to 117.84%.

The entire system of investment management and accounting for pension assets is transparent: each contributor has the opportunity to see his investment income in his personal account on the enpf.kz website or in a mobile application.

Information on investment management of UAPF pension assets and financial instruments in which UAPF pension assets are placed is published on the official website of UAPF (www.enpf.kz) in the section “Indicators/Investment activity”.

UAPF was established on August 22, 2013 on the basis of SAPF APF JSC. The founder and shareholder of UAPF is the Government of the Republic of Kazakhstan represented by the State Institution "Committee of State Property and Privatization" of the Ministry of Finance of the Republic of Kazakhstan. Trust management of UAPF pension assets 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 professional pension contributions, voluntary pension contributions, pension payments, individual accounting of pension savings and payments, provides the contributor (recipient) with information on the state of his pension savings (more details at www.enpf.kz).