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The government of Kazakhstan has unveiled its new pension system reform. One of the major changes is the introduction of a new notional pension component that will amount to five percent pension contributions made by employers, Tengrinews reports.
The government of Kazakhstan has unveiled its new pension system reform. One of the major changes is the introduction of a new notional pension component that will amount to five percent pension contributions made by employers, Tengrinews reports.
The additional five percent pension contributions are compulsory employer payments in the amount of five percent of a person's salary to the pension system every month starting from 2017. Persons participating in the five percent compulsory contributions system for at least five years (60 months) will be able to receive payments from the pool after reaching the retirement age. Disabled persons of groups I and II will also be eligible.
The five percent contributions pool will be adjusted for inflation and other changes every year according to the financial capacity of the Single Pension Fund and the country's demography.
Vice Minister of Health and Social Development Svetlana Zhakupova clarified some procedures relating to the new provision on August 6.
The adopted law says that these contributions will not be considered property of the citizens and will be fixed to a provisional pension account for each employee in the Single Pension Fund.
"Ten percent mandatory pension contributions of citizens will be paid as usual and will certainly be inherited, whereas these five percent contributions will not be inherited and will not be considered property of a pensioner, because these are employer transfers. This money will be an asset of the Single Pension Fund and will be distributed among pensioners. (...) Retirement savings of those who failed to live until their retirement age will to distributed among other pensioners eligible for the payments," Zhakupova explained.
Pensioners will receive payments from the pool of five percent contributions after they run out of their own pension savings The payments from the pool will begin on January 1, 2023. The size of the maximum payout is expected to make around two minimum subsistence levels. In today's terms – it is more than 42,000 tenge ($224).
“For example, a man has amassed three million tenge by via ten percent pension contributions. Pension payments will be paid out of these three million until the savings are exhausted. When the money is over, then the payments from the five percent of contributions generated by employers are provided for life from the Singe Pension Fund,” she said.
According to Zhakupova, the size of the payments will be based on the following indicators: life expectancy after retirement, the amount of savings and the period of participation in the system. The money will not be inherited to ensure that the Fund's lifelong obligations are fulfilled, she added.
Reporting by Assel Satayeva, writing by Dinara Urazova, editing by Tatyana Kuzmina
