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Pros and cons of Kazakhstan's single pension fund

28 january 2013, 18:10
0

On January 23 Kazakhstan President Nursultan Nazarbayev suggested to create a single pension fund by transferring all accounts of private pension funds into it. According to Nazarbayev, such consolidation managed by the National Bank would make management of the citizens’ savings more effective and secure .

Kazakhstan experts told about the possible pros and cons of creation of the single pension fund in Kazakhstan.

Economist and deputy Director of the Center for Analysis of Public Issues Kanat Berentayev believes that creation of the single pension fund will not help radically change and increase reliability of Kazakhstan's pension system. Besides, he doubts profitability of a fund managed by the National Bank.

Kanat Berentayev. Photo by Yaroslav Radlovskiy©

Kanat Berentayev. Photo by Yaroslav Radlovskiy©

Chairman of the Pension Funds Association Aidar Alibayev believes that creation of the single pension fund will have a positive effect, such as decrease of administration costs, such as salaries of presidents of numerous pension funds and their deputies. However, “this positive factor creates a negative one”, he says. Alibayev is concerned about the fate of the people who have been building the pension system over the last 15 years. He is worried that the current pensions funds' employees will be left “at the sidelines”.

“If all the pension funds to be merged into one fund were state-run funds then the merger would an problem. But in our case we are talking about private businesses, because all the pension funds are in private ownership. We have to remember about protection of shareholders interests and business in general. It is yet unclear at which price the pension funds will be purchased from their owners and how exactly it will happen,” Alibayev says. “Whether the owners of these funds agree to sell is also an issue in question. I personally don’t believe that our officials are able to effectively manage anything.”

According to the expert, “the situation will not be so bad, if several companies manage the assets, thus creating a competitive environment”.

Aidar Alibayev. Photo by Yaroslav Radlovskiy©

Aidar Alibayev. Photo by Yaroslav Radlovskiy©

Commenting Alibayev’s concerns, another market expert, Director of the Macroeconomic Research Center Olzhas Khudaibergenov says that most probably the management of the pension funds and the pension system’s professionals will be transferred to the single pension fund. “This will be just logical, as they know this system from the inside."

Speaking about the single fund he says that "creation of the single pension fund is a step in the right direction if for no other reason than because it steps up the guarantees provided by the state,” the expert says adding that the country’s citizens have nothing to worry about. “The money will not disappear and the deposits will be safely transferred from the pension funds to the single pension fund,” he says.

Olzhas Khudaibergenov. Photo courtesy of cmi.kz

Olzhas Khudaibergenov. Photo courtesy of cmi.kz

Judging from the fact that the idea of the single pension fund has been raised once again, a crisis is expected to hit Kazakhstan’s pension system, Zhuldyz Almatbayeva of the Institute of Political Solutions believes. According to her, the system will require some crisis management which requires a single decision-making center. “Returning the pension system to the state seem logical because it was the state that has always been bearing the costs of paying interests on the State Securities where a major part of the pension funds’ money have been invested into,” Almatbayeva said.

She does not expect the citizens to find out much about the mechanism of creation of the single pension fund any time soon. “It is unlikely that the process will have anything to do with the opinions of the pension fund’s clients. As for the concerns, there are some. But I believe that effort should be targeted not at understanding of the single fund system, but at increasing the system’s transparency and achieving a greater accuracy in the funds’ (or fund’s) responsibility to the clients in terms of preserving their money,” the expert said.

Zhuldyz Almatbayeva. Photo courtesy of ipr.kz©

Zhuldyz Almatbayeva. Photo courtesy of ipr.kz©

Zhomart Yertayev sees pros in the single pension fund: he says that this will ensure security of pension savings of the citizens and prop up the people’s trust to the country’s financial system.

Zhomart Yertayev. Photo by Yaroslav Radlovskiy©

Zhomart Yertayev. Photo by Yaroslav Radlovskiy©

One of the existing pension funds, Astana Fund, have also expressed its opinion. “Indeed, not all of the pension funds are showing good results these days. However, every client has the choice and this is the basic principle of a democratic country with the market economy. Based on our experience, state-run monopolies normally don’t show high management efficiency. In the event of creation of the single pension fund, it is most probable that the new structure will be very massive and bureaucratized. And the citizens will have no choice in case of its ineffectiveness,” the fund says.

Besides, according to Astana Fund, radical changes in the rules of operation of the financial market will have a negative effect on Kazakhstan’s international image.

Kazakhstan Minister of Economy and Budget Planning Yerbolat Dossayev has also commented on creation of the new structure. He says that creation of the single system in fact means creation of a unified system of pension accounts management. According to him, the managing companies will remain private and the State Pension Fund will continue working.

Economic Affairs and Budget Planning Minister Yerbolat Dossayev. Photo courtesy of pm.kz

Economic Affairs and Budget Planning Minister Yerbolat Dossayev. Photo courtesy of pm.kz




By Roza Yessenkulova from Tengrinews.kz


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