The Constitutional Court Recommended Clarifying the Legislation on Pension Annuities

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The Constitutional Court reviewed citizens' petitions regarding the constitutionality of the second part of paragraph 1 of Article 818 of the Civil Code of the Republic of Kazakhstan (Special Part). 

Grounds for Review:

The essence of this provision is that insurance premiums paid by the policyholder become the property of the insurer, except in cases specifically provided for by the Civil Code. 

In this case, a pension annuity contract was concluded between the insurer and the policyholder, under which the policyholder transferred the insurance premium to the insurer, who, in turn, committed to making monthly lifetime payments. After the policyholder’s death, the payments were transferred to the designated beneficiary. However, when the heirs requested a lump-sum payment of the remaining amount, the insurer refused, citing that pension savings are not subject to inheritance and belong to the insurer as its property under the second part of paragraph 1 of Article 818 of the Civil Code of Kazakhstan. 

The petitioners argued that pension savings transferred to the insurer should be subject to inheritance in the event of the policyholder’s death. They believed that the provision in question violated their constitutional right to private property protection by depriving them of a lump-sum insurance payment without a court decision. 

Constitutional Court’s Conclusions:

In its decision, the Constitutional Court stated that insurance premiums represent a payment made by the policyholder to the insurer in exchange for insurance protection, where the insurance payout serves as its material equivalent, meaning that the pension annuity contract is a reciprocal agreement. Under these conditions, there is no forced expropriation of property. 

Thus, the funds received by the insurer as insurance premiums constitute the insurer’s income, which it disposes of at its discretion.

The insurer’s obligation is not to return the insurance premium but only to pay the agreed insurance benefits. Therefore, there is no forced expropriation of the policyholder’s property. 

At the same time, the Constitutional Court emphasized that, given the specific nature of pension annuities, the legislation should regulate mechanisms for implementing the policyholder’s lifetime intentions and transferring their rights to other persons in the event of their death, considering the amount of the transferred insurance premium and other relevant factors. 

The general provision on the insurer’s ownership of insurance premiums received from the policyholder, as stipulated in the second part of paragraph 1 of Article 818 of the Civil Code (Special Part), does not align with the norms of the Social Code. The latter grants the policyholder the right to manage part of these funds by transferring the buyout amount to another insurance organization in case of annuity contract termination or by returning funds to the Unified National Pension Fund (ENPF) when modifying contract terms, such as reducing the amount of insurance payments or under other conditions. 

Considering this, the Constitutional Court recommended that the Government review the issue of improving Kazakhstan’s legislation to ensure the coherence of interrelated provisions from different legal branches, taking into account the specific nature of pension annuities as a social institution. 

Review Results:

The Constitutional Court did not find the contested provision of the Civil Code (Special Part) to be unconstitutional. 

The full text of the normative ruling of the Constitutional Court is available at the following link: https://www.gov.kz/memleket/entities/ksrk/documents/details/805078?lang=ru