Toughening of the country’s retirement legislation may cause social tensions

Parliamentarians have warned National Bank Governor Gregory Marchenko that toughening of the country’s retirement legislation may cause social tensions. Majilisman Aikyn Konurov cited France as an example at a plenary session. “We have to admit the country’s pension system has faced a crisis. According to the latest data, Kazakhstan’s pension funds have accumulated a total of $20 million. Funds are ineffective in managing the money. Inflation is eating the accumulations. In line with President Nazarbayev’s instructions voiced earlier this year there have been efforts taken to reform the pension system. Media provide multiple reports varying from raising the retirement age to merging all the pension funds to be managed by a single foreign company. Such reports cause tensions in the society. What happened in France shows that toughening of the retirement legislation may trigger social tensions”, Mr. Konurov believes. In this context, he set a number of questions for the National Bank Governor Gregory Marchenko. “Given that a potential pension reform is of great interest to common people, we believe it important to provide answers to the following questions: are there any plans to raise the retirement age? How does the Government plan to enhance efficiency of the funds’ assets management? Why do pension funds keep on raising salaries and administrative expenses against the backdrop of diminishing profit of pension funds? Who decides on salaries and bonuses of top managers? Why should be there so many pension funds if they are absolutely ineffective? Are there any plans of merging them?”, Mr. Konurov said. Back in September 2012 President had tasked Mr. Marchenko and the National Bank with working out suggestions on how to reform the country’s pension system. “If the retirement age isn’t raised, the country’s pension system will go bankrupt. It’s just a matter of time; and of course the timing depends on the volume of oil revenues”, Mr. Marchenko said at a press-conference October 10. Earlier Tengrinews.kz reported that Mr. Marchenko doesn’t support the World Bank’s suggestion on launching a single pension fund. “We [the Central Bank] turn down the suggestion with indignation. It is wrong to invest the accumulated pension assets abroad”, he believes. According to the Central Bank Governor, the major reason why such suggestions have been surfacing is that the pension savings figure currently stands at $18 billion, and “it is a lucrative lump of interest to many, and many entities would want to decide on investing the funds”. Mr. Marchenko emphasized that Kazakhstan needs to think of public private partnerships to launch investment projects inside the country. He believes about $6 billion of pension assets could be invested into domestic projects involving dependable borrowers.