NUR-SULTAN – Unified Accumulative Pension Fund (UAPF) head Zhanat Kurmanov, speaking during the second Strategic Initiatives Forum Nov. 20 in the capital, suggested the Singapore pension system example should be viewed with caution.
“There are countries with rich experience in pension system functioning and one of them is Singapore. It should be noted that there is no ideal pension system in the world. All experts agree that a mixed pension system, which represents the state, an employee and an employer, is the most stable. There is a need to be careful with the Singapore pension system, because there are certain economic differences between our countries,” he said.
He noted specific economic factors influenced the formation of Kazakhstan’s current pension system.
“We have already decided not to completely copy Singapore’s experience in 1998. One should always approach [this] carefully, through the prism of current economic calculations [that are] 40-50 years in advance,” he added.
Kurmanov emphasised many neighbouring countries are interested in the Kazakh model.
“Russia and Georgia show great interest in our pension system. We have implemented a very consistent and technological concept. It is an institution which invests pension funds around the world and collects all the results by the end of the day. The next day you see the investment results in your account. We provide 80 percent of services to citizens remotely. Many issues have really been resolved,” he said.
Kazakh experts proposed using Singapore as an example after determining the need to reform the Kazakh system. More than 70 percent of citizens with pension savings have less than a million tenge (US$2,500), which is not even enough for a mortgage down payment. A new system will hopefully not only allow people to save for their pension, but also accumulate funds for housing and other needs.
In Singapore, both the employee and employer make monthly deposits into the pension fund, which are then distributed to three different accounts – regular, special and medical.
The funds from a regular account depositor can be used to purchase housing or pay for the person’s or another family member’s education. Funds accumulated in a special account are the “untouchable” pension reserve. If the depositor loses the ability to work or is diagnosed with a serious or incurable illness, he or she can withdraw the money earlier. Medical account money is allocated for the depositor’s healthcare expenses.
“Such a system can be successfully adapted in Kazakhstan’s conditions. Such an integrated approach will be able to meet the interests of all parties, including the state, which can legalise the shadow economy, and employers for whom the tax burden on the wage fund will decrease. And, in this case, employees will receive a full-fledged tool to solve their social issues. Plus, they will accumulate funds for their retirement,” said Centre for Strategic Initiatives Project Director Bakhytzhan Sarkeev.