What are voluntary contributions and should they be deducted?
The accumulative pension system consists of 3 types of pension contributions: compulsory, compulsory occupational and voluntary pension contributions.
Briefly about the first two, the most popular:
- compulsory pension contributions, abbreviated as CPC, is 10% of our salary, which the employer transfers monthly to the employee's individual pension account in the UAPF;
- Compulsory occupational pension contributions or COPC are employer compensation for hazardous working conditions. The amount of such contributions is 5% of the employee's salary, but they are paid from the employer's budget. Citizens whose profession is related to work in mines for the extraction of minerals and other harmful or dangerous areas of activity are entitled to this type of contribution. The full list of such occupations is approved by the Government Decree and can be viewed on the website adilet.zan.kz.
We asked Mamila Mussabekova, Director of the Regional Development Department of UAPF JSC, to tell us more about the third type of contribution.
- Mamila Kurmanzhanovna, what are voluntary pension contributions and who can pay them?
- Voluntary pension contributions - VPCs - are an effective way to significantly replenish your pension capital. The name itself already assumes that anyone can do them, and not only for themselves, but also for their loved ones, including by transferring your minor children to the account. In the future, I'm sure they will appreciate it, and will be very grateful to you!
- Tell me, can legal entities contribute VPC?
- Of course, for example, legal entities can deduct VPC for their employees as a bonus to mandatory contributions. Moreover, VPCs transferred by the employer in favor of the employee are not considered as income of an individual, that is, they are not taxed. For the employer, such expenses are deductible when calculating corporate income tax, that is, the employer in this case also receives tax advantages.
- How to open a voluntary account with UAPF?
- VPC accounts, as well as for all types of contributions, are opened automatically in the pension fund upon receipt of the first installment, that is, the contributor does not need to visit the UAPF office. Identification of an individual in whose favor pension contributions are made is carried out according to personal data (full name, IIN, date of birth) indicated in the electronic format of the payment order when transferring VPC. All the necessary information: about the details of a valid document proving the identity of an individual, about the place of permanent residence, other information, UAPF will receive from the relevant information systems of state bodies.
You can transfer VPC through second-tier banks and branches of Kazpost JSC or submit an application to the employer, on the basis of which he will regularly transfer voluntary pension contributions to the UAPF in favor of the applicant or a third party specified in the application.
- I see, please tell us, how did it happen that unexpected amounts began to appear on the VPC accounts of some contributors?
- Yes, we are often asked this question, although we have already talked about it more than once.
This is due to the fact that in 2022 the procedure for transferring unclaimed amounts of guaranteed reimbursement of deposits from the Kazakhstan Deposit Guarantee Fund (KDIF) to the UAPF was launched. For several years, the unclaimed amounts of the depositors of the liquidated banks were in the KDIF. For many, the terms of circulation have long expired, therefore, at the legislative level, it was decided to transfer them to voluntary pension accounts in the UAPF. The most important thing for contributors is that from the moment the unclaimed amounts from the KDIF enter their IPSA, they are invested in the same manner as pension assets. That is, they "work" and bring investment income.
You can check the availability of receipts from the KDIF by viewing an extract from the IPSA on the websites of the UAPF and e-government, or in the UAPF mobile application.
- How popular are voluntary contributions among contributors?
- Now I can safely say that their popularity is growing. Judge for yourself, as of January 1, 2023, more than 358,000 VPC accounts were opened in the UAPF (more than 484% growth compared to last year), which accumulated about KZT3.6 billion (more than 107% growth over the year).
The growing interest of the population in this type of contributions means that our citizens have become more responsible for their future, think about it and plan!
- How do I get VPC payouts? Only together with the basic retirement pension?
- Not necessary. Citizens who have reached the age of 50, people with disabilities, foreigners and stateless persons who leave or have left for a permanent place of residence outside Kazakhstan, who have submitted documents determined by the legislation of the country, confirming the intention or fact of leaving, can receive payments from the accumulations of voluntary pension contributions, as well as persons who have pension savings on the VPC for at least five years.
- Thank you for the conversation, Mamila Kurmanzhanovna!
Interviewer Baqyt Ospanov
Pension savings of Kazakhstanis increased by 11.4% over the year
Key indicators of UAPF as of March 1, 2023
As of March 1, 2023, pension savings in the amount of KZT15.13 trillion were formed on individual accounts of contributors (beneficiaries) of the Unified Accumulative Pension Fund. Since the beginning of the year, their growth as of March 1, 2023 amounted to KZT466.2 billion (3.2%). Compared to the same date last year, the volume of pension savings increased by KZT1.54 trillion (or 11.4%).
Such an increase was formed taking into account incoming flows in the form of contributions and investment income, as well as outgoing - in the form of pension benefits, including according to the schedule and lump sums - for housing and medical treatment, for the purposes of inheritance, burial, departure for permanent residence, etc.
97% of the savings of Kazakhstanis formed at the expense of compulsory pension contributions (CPC). As of 01.03.2023, the volume of CPC amounted to KZT14.7 trillion (an increase over the year - 11.1%, since the beginning of the year - 3.1%). The amount of pension savings on compulsory occupational pension contributions (OPPC) amounted to KZT466.4 billion, having increased by 21% since March 1 last year, and by 4.7% since the beginning of the year. The largest increase (more than 2 times per year) was demonstrated by the accumulation of voluntary pension contributions (VPC), which amounted to KZT3.8 billion.
For 2 months of this year, the accounts of contributors (beneficiaries) received pension contributions in the amount of KZT319.6 billion, which is 30% or almost KZT74 billion more than last year. It should be noted that the growth occurred in all types of contributions: for CPC - 30%, COPC - 25%, VPC - 70%.
About KZT204.5 billion was transferred to the accounts of contributors (beneficiaries) in the form of net investment income, which contributed to the growth of their pension savings. The share of accumulated net income in the structure of pension savings, taking into account the benefit payments made, as of March 1, 2023, amounted to 36.2%.
The number of individual pension saving accounts in the UAPF as of March 1, 2023 amounted to 12.13 million units, including about 11 million for CPC, 603.7 thousand for COPC, and 364.8 thousand for VPC.
Since the beginning of the year, UAPF has paid about KZT65.15 billion. As of March 01, 2023, payments by age increased by almost 46% compared to the same period last year and amounted to more than KZT24 billion. It should be noted that the size of the average monthly pension benefit according to the schedule from the UAPF (in connection with reaching the retirement age) amounted to KZT32,065, and the maximum amount of the monthly pension benefit - KZT742,692. Recall that for the same period last year, the average monthly pension benefit amounted to KZT29,302, and the maximum monthly pension benefit - KZT707,326.
A significant part of the payments were lump-sum pension pension benefits (LPB) for the improvement of housing conditions and medical treatment - KZT22.5 billion - more than 12 times less than in the same period last year. Also, since the beginning of the year, inheritance benefits have been made KZT8.1 billion, payments in connection with leaving for permanent residence outside the Republic of Kazakhstan - KZT6 billion, disability pension benefits - KZT473.3 million, burial payments - KZT913.7 million. About KZT3.1 billion was transferred to insurance organizations.
All relevant information on statistical data on pension assets, including in the context of the regions of the republic, is available on the enpf.kz website in the "Indicators" section.
The UAPF was established on August 22, 2013 on the basis of GNPF APF JSC. The UAPF founder and shareholder 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. UAPF pension assets are managed by the National Bank of the Republic of Kazakhstan. From January 1, 2016, the functions for developing proposals to improve the management of pension assets were transferred to the National Fund Management Council. In accordance with the pension legislation, the UAPF attracts compulsory pension contributions, compulsory occupational pension contributions, voluntary pension contributions, pension benefits, individual accounting of pension accumulations and benefits, provides the contributor (beneficiary) with information on the status of his pension accumulations (for more information visit www.enpf.kz)