The Kazakhstan pension system currently consists of three levels (pillars) combining mechanisms of solidary and accumulative systems:
Distributive pension system inherited from USSR after its collapse and based upon “solidarity of generations” where the state budget is a source of pension payments paid at the cost of taxes of the working population and other receipts. Amounts of pensions are determined by the duration of employment. Currently, within this level they form pension payments for those who had been employed by January 1, 1998 for not less than six months.
Along with the solidary system the accumulative pension system was created.
Compulsory accumulative pension system with a fixed 10% pension tax paid by citizens of Kazakhstan, foreigners stateless persons permanently residing therein from their monthly income.
Accumulative system based upon voluntary occupational pension contributions.
The pension reform in Kazakhstan is long-term; the full transition to the accumulative scheme will have been completed by 2040.
The Kazakh pension insurance model is based upon the following principles:
Besides, during the entire period of transition to the accumulative pension system the state assumes liability to citizens that had the employment history before the pension reform and guarantees that pensioners may receive pensions and have their amount kept safe from the State Pension Center, taking into account the inflation rate existing at the time;
The accumulative pension system makes the population involved therein independently responsible for the level of their income upon retirement, for their pension savings accumulated on their accounts are to be the only source of pension payments in this case.
Besides, each citizen may, by means of voluntary pension contributions, increase his/her accumulations and thereby ensure higher pension payments upon retirement (third level).
Further proper functioning of the pension system will facilitate the solving of significant social and economic problems, including:
— exemption of the state and taxpayers from part of obligations on providing social support to the retired employees;
— ensuring a more effective and fairer pension insurance for savers after attaining the retirement age, considering their salaries during their being employed, duration of the period within which they were paying their pension contributions and efficiency of the Fund’s investment policy;
— development of the local equity market;
— improvement of the population’s financial literacy and investment culture.
Today’s Kazakhstan is the only CIS country with a multilevel pension insurance system. Within 10 years we created the large-scale Kazakh capital owned by savers.