Accumulation Pension Funds: condition and development
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THE MINISTRY OF EDUCATION AND SCIENCE OF REPUBLIC OF KAZAKHSTAN
International Academy of Business
DEPARTMENT «FINANCE «
On the discipline «FINANCE»
Accumulation Pension Funds: condition and development
Student of II course, group F1102, specialty finance
the Associate Professor
Omarova A. Sh. DBA
Chapter 1. Theoretical aspects of accumulation pension system:
1.1 Economic essence of pensions.
1.2 Stages of formation of accumulative pension system in the Republic of Kazakhstan
Chapter 2. Analysis of current status and development of accumulative pension system in Kazakhstan
2.1 Structure of accumulation pension system
2.2 Pension saving depositors
Chapter 3. Ways to improve the pension system and enhancing its social significance accumulative pension fund provision
3.1 Solutions of problems of accumulative pension system8
3.2. Key areas for improving the accumulative pension funds
The list of literature
The modern practice of state regulation of social and economic development of the country necessitates transition to formation of long-term targets of the pension system. Pension provision in the Republic of Kazakhstan is a leader in the social protection system, and affects the interests of more than 1.6 million pensioners and about eight million members funded pension system. Its qualitative and quantitative characteristics indicate the level of social, economic, legal and cultural development of society. The structure and functioning of the pension system in many ways determine the stability and dynamics of economic and social development of the country. An effective system of pensions, their timely payment support favorable social climate. Kazakhstan Government get the task to strengthen the social orientation by reforms, which strengthening its efforts to reduce unemployment and poverty, creation of conditions for the implementation of the labor potential, timely payment of wages, pensions, and social assistance to the poor. The aim is to improve the social climate in the country.
In the message of President of Kazakhstan to the people: «Strategy of entering Kazakhstan to the number of 50 most competitive countries in the world» from 1st March, 2006 Nazarbaev noticed that «…we are building a socially oriented society …». The transformation of the socio — political system, the transition to a market economy required a fundamental change in the state policy in the field of social security. And since 1997 Kazakhstan is reform pension system because the existing system, based on the principle of solidarity between generations, is exhausted its potential.
And the first step to solving this problem was the Law «On Pension Provision in the Republic of Kazakhstan», which was adopted on 20 June 1997. «This Act establishes the legal and social aspects of pensions in the Republic of Kazakhstan, regulates the participation of government bodies, individuals and legal entities, independent from forms of ownership, in the realization of the constitutional right to a pension. «
According to this law, a modern pension system is formed of two levels: accumulative and distributive. Appear new financial — economic institutions: pension funds, organizations involved in the investment management of pension funds, banks — custodians etc.
The Prime Minister of Kazakhstan KarimMassimov said «Accumulation Pension System in the Republic of Kazakhstan — is our achievement. A lot of things have been done. At the same time- he noted that- accumulative system needs rethinking and adequate answers to the problems, which is ripe today. «
Establishment, formation and management of accumulation pension fundsin transitional economy one of the most timely and insufficient learned problem.
Actuality of the course work is the need to improve management of pension assets, which will serve as a factor, not only growth in the volume of savings of the population, but will help stimulate economic growth. The theme is particularly relevant in the context of problems related to the existing shortage of effective financial instruments and restrictions in the structure of the investment portfolio of pension funds.
The aim of this work is the study and analysis of the development of a accumulative pension system in the Republic of Kazakhstan, based on an analysis of the performance of pension funds to identify problems of the pension market as a whole and suggest ways to solve these problems, the development of plans and recommendations aimed at further dynamic development of the system.
The following research objectives:
· review of theoretic-methodological aspects of a funded pension system;
· analysis of current status and development of accumulative pension system in Kazakhstan;
· identify ways to improve the pension system and improving its social importance.
The object of study is the accumulative pension system of the Republic of Kazakhstan.
The subject is the aggregation of socio-economic relations in the process of organization of pension funds of Kazakhstan.
The theoretical, methodological and information base of course work totaled works of our scientists in the field of pensions and pension funds management. Database research served as the statistics of the Ministry of labour and social protection of RK, the Ministry of finance, the Agency of RK on regulation and supervision of financial market and financial organizations of the National Bank of RK, Agency for statistics, financial statements of Kazakhstan APF. The legal basis used legislative acts and normative documents of the Government of RK, the official policy papers on development of pensions in the country.
1. Theoretical aspects of accumulation pension system
1.1 Economic essence of pensions
Pension funds of Kazakhstan at present is a system of three levels (pillars) that combine solidarity and accumulative mechanisms simultaneously.
Multilevel model of functioning of pension is calculated on the whole population of Kazakhstan. Population segmentation by categories, determining the source of pension payments (State budget and/or pension funds), was based on the age characteristics of citizens involved in the pension system.
The first level is the solidary pension system inherited by Kazakhstan from the Soviet Union after its collapse and based on «intergenerational solidarity», in which the pension becomes a source of State budget with tax deductions of working population and other revenues. Retirement benefits is determined by seniority. Within this level are formed by pension benefits for those whose pensionable service at the time of retirement as of January 1, 1998, is at least six months.
Expulsion mandatory pension contributions during the period of employment meets the conditions of the second tier of the pension system and already obliges the young generation be responsible for its level of income in retirement, as a source of pension payments will be generated by their individual retirement account savings.
Third level-funded system based on voluntary contributions and voluntary occupational pension contributions. Everyone is invited to the voluntary pension contributions increase their build-up and thereby secure higher income after completion of work.
Accumulative pension system is a critical component of social welfare of the Republic, on the one hand, and a vehicle for investing in the economy of Kazakhstan, on the other.
The essence of a funded pension system is to preserve and increase investors ' funds, i.e. investing in real creation. The mechanism of operation is as follows: employers monthly royalty in the form of mandatory pension contributions 10 percent of pay, including salary, all kinds of different prizes, surcharge, surcharges.
Pension contributions are directed to accumulation pension fund chosen by the depositor, to whom the pension contract offer individual retirement account and personal-social individual code. Accumulated contributions funds pass through the depositors authorized custodian bank company under the investment management of pension assets, which allocates funds in securities, deposits of banks and other financial instruments. You received when placing income investment income is distributed called on individual accounts of depositors in accordance with the amount of accumulated funds. Thus, the individual pension savings depositors paid them at retirement age.
Kazakhstan model of pension system is based on the following principles:
· providing investors and recipients the right to choose the Pension Fund;
· compulsory participation in system of all working population;
· differentiation of pensions and other forms of social protection;
· personalized retirement savings account depositors;
· assigning social individual code to everyone who is entitled to pension provision, and further transfer of pension contributions under the social individual code assigned to the contributor;
· accrual of pension contributions and storing generated savings in individual retirement accounts;
· state security guarantees retirement savings in the amount actually contributed by mandatory pension contributions, taking into account the level of inflation at the time of the contributor’s retirement;
· mandatory cumulative pension fund to its depositor or consumer information about the condition of his retirement savings;
· state regulation of participants of pension systems (pension funds (NPF), custodian banks and organizations engaged in investment management of pension assets (NIN)), including: licensing and prudential regulation of SPC, NIN, banks, custodians, monitors their activities through financial and statistical reports, as well as annual audit annual financial reports; the introduction of mandatory requirements for the management and diversification of pension assets;
· deposit money and securities in the Bank’s custodian, who may not be affiliated with NPF or OOUIPA;
· control of the custodian of the Trust Bank pension assets allocation;
· differential treatment of own and pension assets in the Pension Fund;
· failure of penalties for non-payment of pension assets contributor, NPF, custodian bank and OOUIPA, including cases of liquidation or bankruptcy.
In addition, during the transition to a funded pension system assumes obligations towards the citizens of the State, which had worked prior to the commencement of the pension reform, and guarantees held eligible for pensions to retirees and their resulting size of the State Center of pensions payment, taking into account the level of inflation.
Accumulative pension system requires the population to be involved in responsible for the level of their income after retirement, as a source of pension payments will be generated by their individual retirement account savings. In addition, each citizen the possibility of voluntary pension contributions increase their build-up and thereby secure higher income after completion of work.
In addition to creating financially sustainable and fully funded, retirement investors contribute to the economy through:
· increased savings population as a whole;
· development financing institutions and infrastructure;
· promoting the development of the capital market;
· support the development of the financial sector;
· stimulate the development of new financial instruments;
· support the development of the insurance industry;
· development of new legal concepts, such as trustee, trust, etc.
In the Kazakhstan accumulation pension system structure has three main elements: pension funds, organizations engaged in investment management of pension assets management companies (PAMC SECTOR), and banks-custodians.
Schematic of the interaction of these entities while ensuring a funded pension future pensioners is presented in Figure 1.
Accumulative pension funds are among the important socio-economic institutions that control long-term financial resources and are the most active institutional investors in the economy.
Accumulative pension funds operate on the basis of a licence issued by the Agency of RK on regulation and supervision of financial market and financial organizations, which guarantees that pension fund is specialized exclusively in the non-State pension provision.
Accumulative pension funds are working to your deductions were working on the country’s economy and bring you the so-called investment income. The pension funding is strictly regulated by the State to minimize investment risks. If the Pension Fund had certain losses, he is obliged to refund the damage. Pension funds managed by management companies who develop investment strategy. As a result of such a system, you, without force, not just saving up for their old age, but also have an opportunity to receive investment income from their contributions, your money is working for the country’s economy, and the budget is minimal losses to social security retirees. However, if you are not satisfied with the results of the work of the Fund, for example, income level, you may change the Fund and transfer your pension capital, where another fund in your opinion more optimum possibilities for growth of capital/investment income. /12/
NPF in the implementation of its activities could collect pension contributions, receive a Commission payment for their activities and to exercise other rights under the terms of the pension agreement, conclude contracts with the responsible investment management of pension assets. At the same time, accumulative pension funds are obliged to:
· to make pension payments to recipients;
· to conduct individual account retirement savings and withdrawals;
· provide the depositor and recipient of information about the State of his retirement savings, at least once a year, and at his request;
· to protect the confidentiality of information about the State of the recipient’s pension savings;
· be responsible for violation of pension legislation and conditions of the pension contract;
· on application by the recipient to transfer his accrued benefits from one fund to another;
· publish statistical and other information on its activities for the standard time periods of one, three, five, ten calendar years, with the publication of information containing guarantees or promises of income on deposits in accumulative pension funds;
· ensure equal conditions for citizens to enter into pension contract;
· carry out other duties in accordance with the legislation of the Republic of Kazakhstan.
They are legally obliged to annually audit and determine compliance with pension reserves present value of obligations.
Investment management of pension assets of pension funds is carried out by organizations engaged in investment management of pension assets or pension fund with its corresponding license. Organization engaged in investment management of pension assets of accumulative pension funds, is a legal entity, a professional participant of the securities market and is created as a joint-stock company in the legislation of the Republic of Kazakhstan//7 order. The accumulative pension funds, organizations engaged in investment management of pension assets and custodian bank in relation to each other are governed by regulation of the tripartite Treaty, custody which details specifies the rights and obligations of each party and any legal relationship. The interaction between these three legal participants in the pension services is as follows: in accordance with the agreement on pension provision between the Pension Fund and the depositor the depositor receiving contributions come in the custodian bank, to which the Foundation has awarded kastodial contract, on specially opened for this investment retirement account Fund.
NIN, as their name suggests, manages pension assets investing them into various tools that are allowed by law. Pension Fund concludes a contract with the management company, and that, on the basis of its own experience and your own strategy, forcing pension funds run by buying and selling financial instruments.
These market players have two main tasks: to invest pension assets and regularly evaluated. In addition, NIN should regularly report on its activities to the FSA and SPC, as well as through the mass media to depositors funds. NIN are significantly different from other investment companies. First, they are limited in the choice of destinations for investment. A list of tools you can invest pension savings, NIN, is determined by the financial supervisory Agency. This is the most reliable tools with low yield, but with minimal risk. Secondly, if the customer’s normal investment company shares, together with the company, the risks of investing in the case of a pension fund may claim in PAMC SECTOR of it damages caused by inadequate management of pension assets. NIN is liable for its obligations before the accumulative Pension Fund and to depositors all its assets. Thirdly, the legislation requires the NIN, as well as its shareholders and managers a number of requirements and restrictions, which are not valid for other investment companies//12.
The third element of the system is the custodian bank, which is not affiliated with NPF or OOUIPA, keeps pension money and control their target location. He informs the NPF monthly about his State accounts and the activities of the NIN. The pension fund should be only one custodian bank. But the Bank can serve multiple funds. Custodian Bank — the Bank, carrying out activities on the fixation and incorporation of rights on securities, safekeeping of certificated securities and accounting for money of a client. Custodian Bank controls the target location of pension assets of NPF and obliged to block (not enforce) orders NIN or SPC if inconsistency. Moreover, the law stipulates that in such a case, the custodian bank shall immediately notify the authorized agency and SPC.
This system of independent elements allows you to maintain a high level of reliability of pension capital.
In addition to the three key elements of the market a greater role in the work of the pension system is played by the Republic of Kazakhstan Agency for financial supervision (FSA) and the Kazakhstan Stock Exchange (KFB)//12.
The role of the regulator is the Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations. The FSA regulates and monitors the activities of banks, pension funds and NIN, professional stock market participants, insurance companies and organizations conducting certain banking operations. FSA every month on its website provides information about owned capital, liabilities and assets of NPF, nominal income coefficient on pension savings, the NPF and the number of pension accounts of depositors in the NPF, the interest rate, credit, stock and currency risks, the investment portfolios of SPC, as well as the current state of the funds. Also in his work includes preparation of summary reports on the balance sheet and statement of profit and loss of the NPF. In accordance with the law of the Republic of Kazakhstan as of July 4, 2003 year on State regulation and supervision of financial market and financial organizations «in the list of functions of the FSA is responsible for:
1. in cases stipulated by legislative acts of the Republic of Kazakhstan, to issue and revoke permission for opening (a) financial institutions, their voluntary reorganization and liquidation, consent to the opening of offices of financial institutions, as well as to determine the procedure for the issuance of the authorization and consent;
2. in cases stipulated by legislative acts of the Republic of Kazakhstan, to consent or refuse to consent to the election (appointment) of persons in positions of executives of financial institutions, as well as determine the order giving the consent or refusal of consent;
3. set the procedure for the issue, suspension and revocation of licenses for carrying out professional activities in the financial market in cases stipulated by legislative acts of the Republic of Kazakhstan shall issue, suspend or revoke the license;
4. to issue normative statutory acts, mandatory for financial institutions, consumers of financial services, other individuals and legal entities on the territory of the Republic of Kazakhstan;
5. approve the prudential norms and other mandatory norms and limits of compliance for financial institutions, including on a consolidated basis;
6. set list, forms, deadlines and reporting lines (excluding financial and statistical reporting) financial institutions and their affiliates;
7. monitor the financial organizations of the Republic of Kazakhstan law on accounting and financial reporting and accounting standards, except for cases stipulated by legislative acts of the Republic of Kazakhstan;
8. to send a representative to participate in the general meeting of shareholders of financial institutions;
9. check the activities of financial institutions and their affiliates in cases and within the limits stipulated by legislative acts of the Republic of Kazakhstan, including audit organization;
10. determine the order of application and apply to financial entities limited measures and sanctions provided for by legislative acts of the Republic of Kazakhstan;
11. in consultation with the Government of the Republic of Kazakhstan to decide on compulsory redemption of shares of financial institutions in cases stipulated by legislative acts of the Republic of Kazakhstan;
12. oversee liquidation commissions financial organizations in cases stipulated by legislative acts of the Republic of Kazakhstan;
13. publish in mass media information about financial institutions (with the exception of information constituting commercial, banking or other secret protected by law), including information on measures taken thereon.
Exchange runs as a dedicated shopping mall where they sell and buy various financial instruments, as well as currency. This is the platform where NPF operations with hronometr. When investing in a variety of investment instruments, mostly securities, pension funds are turning to the pension asset. Exchange is a leading regional financial market, where investors from all over the world have the opportunity to trade financial instruments a wide range with the minimum calculated risk and in accordance with international best practice, and enjoy the variety and the quality of the Exchange related services//12.
Accumulative pension funds are major institutional investors on the domestic stock market. The largest share of pension assets (43%) invested in non-governmental securities issuers. 26% of assets invested in government securities. By 14% in paper foreign issuers and deposits in banks//12.
1.2 Stages of formation of a accumulative pension system in the Republic of Kazakhstan
pension system kazakhstan
Modern Kazakhstan pension system begins the countdown to 1997, when the Government of the Republic of Kazakhstan approved the concept of the reform of the pension system in the country, and of the Republic of Kazakhstan adopted the law «on provision of pensions in the Republic of Kazakhstan». The innovation consisted in the creation of a funded pension system with the phasing out of solidary system.
At the end of the last century the pension problems have become particularly acute. The reason for that became the transition to a market economy mechanisms, on the other, socio-demographic factors inherent in Kazakhstan in the 90 's. The former solidarity pensions system, high rates of inflation and unemployment of the population, the fall in GDP, acute fiscal deficit were the causes of the emergence and increase of arrears in pension payments and the inability to provide even a minimum level of social guarantees. Thus, became apparent fragility of the PAYG pension system, based on solidarity between generations. On the problems of insufficient financing of the necessary pension costs demographic. Some of them were related to the deformation age structure of the population and the acceleration of processes of ageing populations by reducing the birth rate against a background of increased life expectancy.
Rising unemployment and the spread of casual and part-time work have led to adverse shifts in the labour market, which became part of the population from the mandatory pension scheme, whose contributions have been the source for the financial basis of solidary pension system. In order to reduce the projected growth and excessive increase of the pension burden on the working population, prevention of deterioration of the living standards of both working and retired people, ensure uninterrupted payment of pensions in the future, the Government of the Republic of Kazakhstan as an alternative solution to the overdue reform of the pension system was conducted.
The pension reform was adopted by the Chilean model. Chile’s pension system does not contain a control mechanism and is completely based on the accumulation of funds to individual accounts of employees and market capitalization of contributions. Anyone who marries an accumulative pension scheme receives a personal account that accumulates its pension contributions that are installed and registered. These funds are accumulated and invested by private pension funds, and on reaching retirement age they investor becomes the source of his retirement benefits. In addition to the basics of the Chilean system of Kazakhstan model of perceived and adapted to fit their particular experience and other countries, and is considered one of the most successful in the world practice//12.
Main stages of development of accumulative pension system:
1997-developed and approved by the Government of the Republic of Kazakhstan the concept of reforming the pension system in the Republic of Kazakhstan:
· shall enter into force the law of the Republic of Kazakhstan «on provision of pensions in the Republic of Kazakhstan»;
· adopted Government decision on the establishment of the closed joint-stock company «State accumulative pension fund». The SAPF was assigned a special strategic role: stimulate the development of NPS, maximizing involvement of the population in accumulative pension system and a base of depositors pension systems, building confidence in the new pension system, create the foundations of the pension market and the competitive environment;
1998-start of pension systems and pension market infrastructure;
19 January-the SAPF entered the first ever fully funded pension system of Kazakhstan pension contribution;
1998-SAPF operates in the «default» Fund: mandatory pension contributions transferred by the employer to the SAPF, if an employee was not identified with the choice and is not contracted with another pension fund;
1999-first among the SAPF pension funds funded pension system in history has received a license for independent management of pension assets.
2003−2004: -provision of State guarantees to depositors in the amount actually contributed by mandatory pension contributions, taking into account the level of inflation at the time of acquisition of the recipient the right to pension benefits:
· defined scheme pension payments and a possibility to receive pensions through insurance companies;
· changed the size and structure of remuneration of accumulative pension funds;
· strengthened accountability agents to pay the mandatory pension contributions;
· introduced voluntary occupational pension contributions;
· developed and adopted a programme for the development of a funded pension system for 2005−2007 years.
2005 -SAPF changed its official name from «State accumulative pension fund» JSC accumulation pension fund GNPF where abbreviation is the old content is not preserved;
2006-a single stocking Center in order to optimize the payments to the pension system, «of the State Center of pensions payment:
· installed extra-judicial liability of pension funds and organizations engaged in investment management of pension assets, keeping nominal yield savings of depositors;
· transfers of pension savings depositors between pension funds through the State Center of pension payments.
2007: Organization and holding of the International Conference on the initiative of the SAPF pension market of Kazakhstan -- 10 years system reform «, dedicated to the 10-year anniversary of a funded pension system of Kazakhstan//15.
2009: implemented automatic translation system of savings from one fund to another, is «taxpayers across the State Center of pension payments.
2. Analysis of current status and development of accumulative pension system in Kazakhstan
2.1 Structure of accumulation pension funds
Accumulative pension funds stand at the forefront of a funded pension system. They accept pension contributions, keep records of individual retirement savings, inform investors about the status of their invoices and the saver reaches retirement age pay pension. Funds to depositors are responsible for the safety and profitability of their savings. Most funds provide pension services to all segments of the population in all regions of Kazakhstan and accepts both mandatory and voluntary deductions/12/.
APF — legal person conducting activities on attraction of pension contributions and pension benefits, as well as the investment management of pension assets in the manner prescribed by the legislation of the Republic of Kazakhstan//1.
On November 1, 2012 year 11 work in Kazakhstan pension funds.
All funds can be broken down into two categories:
· corporate-funds set up only for employees of an enterprise or industry;
· public-funds, for all categories of the population.
To corporate concerns only one in Kazakhstan accumulation pension fund, namely the APF Kazakhmys, which was set up only for employees of the Corporation. All other pension funds are public.
Table 1. Structure of accumulated pension system:
Institutional structure of accumulation pension system
1. 01. 12
1. 10. 12
Number of accumulated pension funds
-incl. independently performing investment
pension asset management
Number of branches of accumulative pension funds
Number of branches in the regions
Number of organizations, performing investment
pension asset management
The number of banks licensed to conduct
engage in custodian activities
-of them banks, custodians of accumulative pension funds
2.2 Pension savings depositors
In General, there has been an increase in the number of accounts of depositors (recipients) on obligatory pension contributions and the amount of pension savings.
Table 2. Depositors (recipients) of accumulative pension funds.
Number of depositors
(recipients) of accumulative
1. 01. 12
1. 10. 12
on a conservative
on obligatory pension
8 137 395
8 360 641
8 114 706
under voluntary pension
under voluntary occupational
Retirement savings depositors (recipients), an increase from the beginning of 2012, at 384.8 billion. (14. 5%), on October 1, 2012 year amounted to 3036.2 billion tenge.
On October 1, 2012, the largest amount of pension savings had 4 fund: «the Halyk Bank of Kazakhstan"-1001.8 billion. tenge (33. 0%), gnpf-585.6 billion tenge (19. 3%), «?lar"-Umit 393.7 billion (13. 0%) and «Grantum-289.0 billion tenge (9. 5%) of the total retirement savings of all funds or in the aggregate, these 4 accounted for 74. 8% of all fund retirement savings.
The sum of fines for delay in transfer of mandatory pension contributions, delayed transfers of pension savings and improper management of pension assets, an increase since the beginning of the year to 1.3 billion. (10. 7%), on October 1, 2012 year amounted to 13.4 billion.
Pension payments and transfers of funds to insurance companies reporting date totaled 306.6 billion tenge, an increase compared with January 1, 2012, for 73.4 billion. mln, or 31.4 percent.
01. 01. 12
01. 10. 12
Growth rate (in%)
Transfers of pension savings insurance recipients in
accordance with the treaty annuities
Transfers to other pension funds
Transfers of pension savings to insurance recipients in accordance with the Treaty annuities from the beginning of 2012, implemented 11 985 recipients totaling $ 21.3 billiontenge.
Placing information on the funded pension scheme on the site of the authorized body, and also funds the publication of information in the mass media, allows depositors (recipients) to choose and use the Fund provided pensions legislation to transfer retirement savings from one fund to another.
As of October 1, 2012, the total amount of pension assets investment management PAMC SECTOR stood at 3041.7 billion. tenge, an increase since the beginning of this year to 389.5 billion. mln, or 14. 7%.
The average monthly increase in pension assets for the period from October 1, 2011, October 1, 2012 year amounted to 43.0 billion. tenge.
On October 1, 2012, the amount of pension assets stood at 3041.7 billion. tenge, an increase since the beginning of this year to 389.5 billion. mln, or 14. 7%.
Table 5. Distribution of total pension assets
01. 01. 12
01. 10. 12
JSC «НПФ Народного Банка Казахстана»
JSC «НПФ ГНПФ»
JSC «НПФ ГРАНТУМ» (ДО АО «Казкоммерцбанк»)
JSC «НПФ «Капитал» — ДО АО «Банк ЦентрКредит»
JSC «НПФ «Атамекен» ДО АО «Нурбанк»
3. Ways to improve the pension system and enhancing its social significance accumulative pension fund provision
3.1 Solutions of problems of accumulative pension system
The shortcomings that currently characterized by Kazakhstan’s pension system: the low level of financial literacy and investment culture; insufficient coverage of accumulative pension funds, particularly on Agriculture and the self-employed; lack of retirement savings to a decent level of retirement benefits in case of old age; underdeveloped system of voluntary pension savings; the effective investment of pension savings, in conditions of scarcity of attractive, and at the same time reliable and liquid securities.
Since the reform of the pension system in Kazakhstan and to present big problem that is always present and, perhaps, in the future, it’s a problem wither away ignorance of people in the notion of the pension system and its purpose. The majority of the working population does not have even a clue about the need for retirement savings, because of some negative aspects, such as the questionable activities of valut-Tranzit Bank «has had an impact on almost universal agreement that any organization that accepts deposits, does not guarantee the safety of these deposits. Therefore, only when the overall girth of Kazakhstan pension funds for teaching literacy, pensions may be further improvements in the pension system as a whole.
The next problem is that most people are self-employed. In Kazakhstan, 2.5 million. self-employed citizens. It is said that the 2.5 million. Kazakhstan will not be retired. The issue here is not to pension funds, and to the scheme on which they operate, and a State that is not fully constructed. The process of restructuring the economy to reduce the number of self-employed population is a continuous process.
One method to address some of the problems outlined above could be the introduction of the so called «multiportfele» that would enable every investor make investment decisions in the management and promotion of their retirement savings, based on their own preferences in the risk/return ratio. To start the introduction only three portfolios is expected based on the conservative, moderate and aggressive investment strategies. However, in the future under certain conditions is possible and a model keyboard is already more investment strategies. Thus, there is the prospect, in which depositors would have not only rights but also responsibilities for managing their pension assets. Analysts expect that this measure will be effective for at least three problem positions: to overcome the low level of investment and financial literacy; to engage in the pension system of those who still prefers to stay out of it; and in the development of the voluntary pension scheme. By the way, the introduction of multiple investment portfolios alongside solid safety guarantees retirement savings are the priorities set by the head of State in the framework of further development of the pension system.
Different trends in profitability on the market investing pension assets show that the pension funds of Kazakhstan are in search of the best ways of preserving and increasing money savers. Therefore, the study of problems and prospects of development of the pension funds are gaining relevance.
The situation today is the pensions of our citizens cannot but cause concern and not only among the pensioners, and not only at the next candidates (employees nearing retirement age), but also in people of middle age and young people.
In fairness it should be noted that in recent years the average monthly pension has risen substantially: assigned to 9898 tenge in 2006 to 2010, the tenge in 21 500. At the same time, it is clear that pensioners in our country continue to be the population with the lowest income.
With the start of pension reform in 1998, increased the retirement age from 60 to 63 for men and from 55 to 58 for women. Although the average life span of men in Kazakhstan barely perevalivalo for 61 years. Apparently this can explain the significant decrease in the number of pensioners with 2. 85 million. in 1997, prior to the 1998 year, 1. 98. Reduction in one year alone amounted to almost 900 thous. (!) man. Since then, the number of people receiving pensions in our country declined steadily (respectively increased the number not lived up to the retirement age), reaching 1. 63 million. in the year 2007 (currently about 1.7 million). The average life expectancy in Kazakhstan in 2009 amounted to: men-63.6 years; Women-73. 55.
In a difficult financially for the country, the Government has found a very simple solution is to reduce the burden on the budget at the expense of the elderly. People, citizens, of course, could understand and internally to take such a decision of the Government, if the facts have not been observed the apparent theft of public resources by individual, particularly close to power. If there has been no widespread increase corruption and awkwardly large relative to the population and GDP of the State the number of dollar billionaires and multimillionaires in this country.
At the same time it was decided to further reduce the load on the Government budget through a gradual transition from shared to a funded pension system model, the so-called «Chilean» model.
For over 12 years 10% monthly deductions from the wages of citizens of our country have allowed current 13 Cumulative pension funds accumulate more than 2 trillion tenge. Seems like a wonderful picture.
But official sources analysis shows in www. afn. kz:
1. percentage of risk-weighted assets) in the fair value of pension assets is 55% (resolution). That is, in case of adverse development scenarios in pension funds will only have 45% of the current amounts.
2. all NPF (except for one facility) has been a real negative return on invested funds. So the average nominal income coefficient on pension assets of NPF for the last 5 years has been equal to 43. 35% whereas the accumulated rate of inflation according to the official data for the same period amounted to $ 61. 53%. That is, the number of accumulated wealth is real not only has not increased, but decreased purchasing power aimed at the NPF money to more than 18%.
3. Implications of the global turbulence, significantly increased in the second half of 2008, revealed the national pension sector. The second wave of the global financial crisis, caused by the bankruptcy of the world’s largest financial institutions and that have provoked increasing volatility in the stock, commodity markets and the deepening crisis of confidence in money markets, had an impact to some extent on nearly all segments of the domestic financial sector, key indicators of development which demonstrated the lowest growth rates in recent years, and in some cases even lower.
Kazakhstan APF portfolios, as well as overseas, showed a high sensitivity to shocks, both in global and domestic equity markets.
So, for the first time since the beginning of the pension systems of Kazakhstan in September 2008, recorded a decrease of pension savings, due to the decline in investment income due to volatility in financial markets and the resulting negative trend of market quotations on securities held in the investment portfolios of APF. Thus, securities quotations of Kazakhstan issuers, including BWI, amid a slew of negative expectations about the stability of the financial sector and increased Stock volatility, commodity markets fell almost to its minimum of historical values.
The global financial crisis has prompted a new look at the performance of pension funds. If most of the funds showed a negative return only if the lessons the inflation rate, the individual showed negative returns and the NPF in nominal terms. Analysis of NPF throughout the world shows a gloomy picture of increasing yield reduction in the unfolding global economic crisis. Management of SPC to increase profitability begins to invest an increasing proportion of their funds in higher-risk assets (equities). Increased risks of such financial instruments under definitely not ended the world economic crisis is apparently an increasing number of experts. At the same time, «Greek syndrome» significantly increased the risks of owning Government bonds. «Hot cakes» the pre-crisis period (era) «risk-free» tools — CDOS (credit default swap) and other derivatives have former popularity.
What remains? Where did invest free funds SPC, the volumes of the world which reach an estimated 10 trillion dollars? Remains the only raw food and precious metals. And here we see a picture of rapidly increasing prices unnaturally high oil, wheat and gold (gold in September reached a historic high in 1300 per Troy ounce). Money could inflate another NPF «bubble». At a time when it becomes evident that the real economy will not be able to pay for the raw materials and metals up to cosmic heights prices inflated, will start a landslide and widespread (and final) price drop on everyone and everything.
It is becoming increasingly clear that in light of the current global economic crisis, may be the darkest in the spirit of prophecy: «when I get the money from my retirement NPF is likely to evaporate and I get nothing» or «prices at that time will be such that I can buy on their pensions only a loaf of bread».
The main challenge for today is to increase the minimum pension to a decent level. Currently living in Kazakhstan is tenge 14 952. The basket consists of 60% of food products and 40% of non-food items. At the same time, in accordance with international standards of consumer basket shall consist of 30% of the food and to 70% of non-food products and services. That is, if you make a recalculation, you get the value of the subsistence minimum 29 304 tenge. From here, it is abundantly clear that the minimum pension should not be less than the amount withdrawn. As recommended by the International Labour Organization (ILO), the difference between the minimum and maximum pensions shall be 3.5 -4 times. We have this gap now stands at around 2.7 times. Direct comparison of the standard of living of our pensioners and European course is not in our favor. For example, the size of the average pension in Germany is 984 euros in Finland, -1.3 thousand Euros, in Holland — 3.2 thousand. Euro. In case of increase of the amount of the minimum pension to 30 000 tenge. achieve twice the difference between the minimum and maximum dimensions of pensions in the first phase can be seen as a great victory.
Already since the year 2011, it is possible and necessary to increase the amount of the minimum pension to 30 000 tenge. The size of the average pension would amount to 45 000 tenge. The maximum pension is 60 000 tenge. While most retirees should receive a pension within the boundaries of 40 000 — 50 000 KZT. Not more than 3% should be about 7% is the minimum and maximum.
Appropriate changes need to be made to the method of calculating pensions. The principal point is considered the introduction of such additional relevant Techniques and work rules that would have abolished the practice of collecting future retirees now all kinds of references and archival documents. Future pensioner will be required to submit to the territorial units of the MTSC personally, ID card and (if any) work book. All other actions to collect necessary and sufficient for the calculation and calculation instruments must be carried out by employees of the territorial units of the MTSC.
3.2 Key areas for improving the accumulative pension funds
In perspective within the framework of the implementation of Stateprogrammes, including a programme to develop e-Government, legislative development work is expected to move towards the provision of affordable e-finance services for the entire population, including remote regions, based on the electronic card. As part of its plan to provide base applications electronic provision of pensions of citizens. Introduction electronic technology would solve both the workflow with depositors and facilitate the transfer of savings between funds.
From 2012, the conclusion of agreement on pension provision with the Fund and the transfer of savings will be automated through the use of electronic cards. Therefore provides for optimization of the process of storing documents electronically and improve the process of informing investors.
Thus, the investor shall further directly rather than indirectly, will participate in making the most important decisions and activities of pension funds should move completely to a new level.
Also provide measures to ensure proper control and accountability for the planning and implementation of investment projects, risk redistribution of State business and developing mechanisms to compensate pension funds in the financing of such projects. The safety of retirement savings, to finance investment projects in the framework of public private partnership, will be one of the fundamental guarantees of the State. Needs to develop a strategy for managing assets and liabilities of the public sector in close relationship with the objectives and activities for the development and improvement of individual segments of financial markets, including the stock market and the cumulative pension system/6/.
Development of the funded system depends directly on the profitable placement of pension assets in various financial instruments. The growth in pension assets requires additional attachment objects. This is particularly necessary because pension money is an important element of domestic investment resources of the country. Through pension funds money savers form the capital which in turn invested in projects. In addition, they play a stabilizing role in the financial system of the country. The accumulative pension funds of Kazakhstan today are a real institution in possession of such great financial means.
With a funded pension system on a mandatory basis are 26 countries. The systems are in close cooperation with the regulatory authority and the Association of financiers. Prepare bills on transition to mul? tiportfeli in order to increase profitability in the future. It is clear that these innovations will result immediately. The effectiveness of the mul? tiportfeli experience of Chile. Plan to implement the same system in Kazakhstan.
By 2012, all of Kazakhstan’s pension system will be completely transferred to the new regime. What it means and how it will affect depositors.
10% of our monthly salary is transferred to the accumulative Pension Fund (NPF). Once the money arrives on retirement accounts, NPF is starting to invest them in various financial instruments. This is done to increase the size of the savings, otherwise the money will just accumulate in the accounts and depreciate over the years because of inflation. To prevent this, the accumulation of «scroll» in the securities market. Thus, our money to bring in some income, and we automatically regarded by investors.
Unfortunately, not all funds provide to their investors desired profit. It all depends on what strategy the NPF has selected — the depositors did not participate themselves. But beginning next year, the first time in Kazakhstan accumulative pension system, each depositor will be given the opportunity to choose their own strategy to increase their savings. Strategies will vary according to the level of profitability and risk.
According to the amendments, in 2008 Pensions Act each APF from 2012, would be obliged to form at the expense of pension assets of conservative and moderate investment portfolios. In addition, he will be entitled to further shape the aggressive investment portfolio. According to each type of investment portfolio will be a certain investment strategy. For example, a conservative portfolio of financial instruments will be presented, with the exception of shares that have a relatively low risk: that Government securities, securities most trusted issuers of fixed-income securities and denominated in the national currency. Moderate portfolio, the assets of which will be invested in financial instruments, including those of no more than 30 percent in stocks, that is, apart from nizkoriskovannyh securities portfolio would include a share more than the risky financial instruments that typically provide a higher yield. Aggressive portfolio assets will be invested in financial instruments, including up to 80% in stocks and derivatives and instruments denominated in foreign currencies, which tend to have the highest risk. Terms and conditions of pension assets investing in financial instruments, including:Показать Свернуть