Ex Chairman of the Central Bank on excessively protracted merger of pension funds
25 october 2013, 15:42
Gregory Marchenko. © Yaroslav Radlovsky
Ex Chairman of the Central Bank Mr. Gregory Marchenko in his interview for Delovoi Kazakhstan (“Business Kazakhstan”), voiced reasons behind excessively protracted merger of pension funds into a single pension fund.
“I believe the process of swapping stakes in the three biggest pension funds [in exchange for stakes in government-owned banks] between the funds’ shareholders and Samruk-Kazyna Sovereign Wealth Fund is unjustifiably protracted as shareholders of these pension funds have lost their business”, Mr. Marchenko said.
According to him, currently the necessity of swapping the stakes “is rather controversial”.
“Shareholders of pension funds involved into the swapping deal are first of all interested in having their missed profit compensated for. If the deal to swap stakes had been closed in line with conditions voiced at the start of the year, the actual transfer of pension savings into the State-run Single Pension Fund could be completed by the end of the autumn. Now the transfer has been postponed to the autumn of 2014”, he said.
Kazakhstan’s President Nursultan Nazarbayev instructed the Government late January to merge all the pension funds into a single government-owned entity.
The Single Pension Fund was launched in August 2013.
As of December 1, 2012 there were 11 pension funds operating in Kazakhstan, with combined savings standing at around $21 billion.
Before the decision on merging all the country’s private pension funds, PM Serik Akhmetov said that “the current service fee rates applied by the country’s pension funds have been reducing the people’s pension savings by 26%”.
“According to experts, within the average saving period, the applicable service fee rates have been slashing people’s savings by about 26%. It is an excessively high rate. Given all that, the decision to launch a single pension fund [to replace all the pension funds operating in Kazakhstan] was very reasonable on the part of the Government”, the PM said May 5.
“This scheme of managing has brought about a number of problems … It’s obvious that private pension funds have failed to cover all working people with saving plans”, the PM admitted at that time.
According to him, only 5.6 million out of 8.4 million working people were covered with saving plans, with only 4 million people making pension deductions on a regular basis, which was less than half of working population.