Kazakhstan has surpassed its CIS neighbors in the ranking of countries with the best pension systems.

Allianz, a leading global insurance company and asset manager, has released a new edition of its Global Pension Index (API). Kazakhstan's pension system received an API rating of 3.5 based on an analysis of 75 pension systems worldwide. Kazakhstan outperformed its CIS neighbors, as well as Spain, Chile, Singapore, the UAE, and other countries. These results indicate that Kazakhstan's pension system ranks slightly above average in terms of the sustainability and adequacy of pension payments compared to other countries analyzed by Allianz.

The report is based on current data as of March 2023. The Allianz Pension Index (API) is designed to comprehensively assess the sustainability and adequacy of pension systems. It consists of three sub-indices and considers 40 parameters, assessed on a scale of 1 to 7, with 1 representing the best result.

According to the report, the average score for all pension systems analyzed was 3.6. This indicator is a slight improvement over previous years, given the limited capacity in most countries following the COVID-19 pandemic, followed by unprecedented global hyperinflation fueled by the energy crisis and rising food prices due to global political events. Despite the need for pension reform, only a few countries have achieved significant improvements. Denmark, Sweden, and the Netherlands occupy the top half of the index, with a final score of up to 3, as their pension systems provide for automatic adjustment of the official retirement age based on changes in life expectancy and have strong occupational and private funded pension components.

Denmark, according to Allianz, has the best pension system with a score of 2.2, followed by the Netherlands and Sweden, both with 2.6 points, New Zealand with 2.8 points, the United States, Taiwan, and Israel with 2.9 points each, and Belgium and Australia with 3.0 points each. South Korea rounds out the top ten with a score of 3.1. The pension systems of Morocco, Lebanon, and the United Arab Emirates rank lowest. These countries face challenges with low retirement ages, low pension coverage, and rapidly aging populations. One factor contributing to low coverage is the prevalence of informal employment in many developing countries, highlighting the need to reform labor markets alongside pension system reforms.

The Allianz report emphasizes the issue of population aging, as this demographic process is one of the main challenges to pension systems worldwide. By 2050, approximately 1.6 billion people worldwide are projected to reach 65 years of age or older, of which approximately 1 billion will be in Asia (primarily India and China). Life expectancy will increase from the global average of 73.4 years in 2023 to 77.2 years by 2050.

Therefore, it is crucial to prepare pension systems for demographic changes to ensure long-term financial sustainability and avoid placing undue burden on future generations. Allianz emphasizes the need to find a balance between sustainability and adequacy. Media Contact: press@enpf.kz Official Website: www.enpf.kz Facebook, Instagram: enpf.kz Press Center of JSC ENPF. This may require a reduction in state benefits in industrialized countries and additional pension provision (occupational and private pension plans) to achieve a decent standard of living for older people.

Over the past year, several countries have taken measures to improve the long-term sustainability and adequacy of their pension systems, including raising the retirement age in some countries (France), introducing mandatory pension contributions for all private sector workers (Cambodia), and introducing incentives for additional private provision financed by capital (pension savings). However, according to statistics, the retirement age in many countries does not reflect changes in life expectancy: only eight out of 75 countries have established by law an automatic link between retirement age and changes in life expectancy. Thirty-three countries plan to raise the retirement age by 2050.

As Allianz notes, the adequacy of pension systems is determined not only by financial sustainability but also by the level of benefits and the income replacement rate. The replacement rate for first-tier pensions in a pension system should be between 40% and 60% of the average wage, according to International Labor Organization standards. The latest OECD statistics show that Brazil has one of the most generous pension systems, with a replacement rate of 89%, while Kenya, Lebanon, and South Africa have replacement rates of only 15%.