Intensification of a Pension Question

Sergei ABAKSHIN

The pension traditionally is one of problem points of state policy in Kazakhstan. The pension question becames more difficult and sharp in the light of crisis phenomena. Accumulative pension system existing in the country is based on the so-called Chilean principles. But not all the specialists could agree with the point. In any case, the system goes through extremely difficult time.

In 2035 the solidary pension system in Kazakhstan will come to naught (zero). It means that future pensioner should rely only on the own savings has accumulated during his/her life. Mr. Aidar Alibayev, the chairman of Association for Pension funds of Kazakhstan, prognosticates that the Government will do nothing for such pensioners and «will not give any money» for them. But Mr. Rakhman Alshanov, the president of Association of High schools of Kazakhstan, considers that the state should allocate the minimum grants from the incomes because of the state was unable to create the system providing all the citizens with normal workplaces. Otherwise, the citizens will not understand the State and the Government.

At present the accumulative pension system is in force in Kazakhstan. There are only about thirty states with the similar model all over the world. The pioneer of such system is Chile. When Mr. Aidar Alibayev got acquainted with the Chilean experience, the Chilean experts insistently advised not to hire the banks employers to Accumulative Pension Funds (APF), and to keep away from the banks. The reason of such attitude to the banks lies in their relation to money. The essential aim of any pension fund is to save and increase, if possible, means (money) of future pensioners. As to banks, their first aim is in maximizing the profit, that's why the banks are compelled to get involved in risky operations. However, due to extremely powerful lobby from the large banks many of APF-s became affiliated with them (there are no any legislative prohibitions for this purpose). The leaders of such APF-s are not free to choose the objects for financing. In 2008 the pension system of the country incurred big losses, and the greatest portion in USD 48 billions of the loss fell to lot of «bank» APF-s.

The pension funds should invest money in the «long-term» projects such as the enterprises of real sector of economy, roads, infrastructure. But the bureaucrats (officials) do not want to deal with this money. This money are «noisy (lively)», whereas the budget means are «silent» and could be stolen quietly.

«I'm surprised with people's sluggishness», Mr. Aidar Alibayev has emphasized. When the first information about the losses in APF-s appeared there has been short-term burst of calls during only for 10-12 days, and then it has stopped. The investors can bring suit against the leaders of pension funds for poor-quality management. However nobody makes precedent.

If it were not for the state «obligatory measures» to do pension deductions into APF-s, many of future pensioners would preferred to have bank deposits or current consumption. Mr. Rakhman Alshanov has noted that psychologically many of future pensioners are ready to work to death or to receive the financial help from their children. But it is not a way out. In Kazakhstan there are 2,5 millions of the «self-engaged» employers (this is a specific Kazakhstan term, which means «economically independent from the state» workers) who haven't pension accumulations at all. Those «self-engaged» employers who have pension accumulations are not sure that such savings will be enough to live independently in the future. Mr. Alshanov considers that it is high time to found Association on Protection of the pensioners accumulations.

One year ago (the 10-year anniversary of introduction of accumulative pension system in Kazakhstan) assets of APF-s have made 1 208 120 846 000 tenge, and approximately USD 10 billions at the currency rate. Last year, despite of crisis, the 10% deductions from the salaries were regular, and on February 1, 2009 assets of APF-s have made already 1 439 054 917 000 tenge. This is not USD 10 billions, but USD 12 billions. In March 2009 it was not bad increase of the assets up to 1 499 783 937 000 tenge. But their cost is ... USD 10 billions again! The reason lies in 25% devaluation of tenge. In spite of all this Kazakhstan authorities didn't promise any compensations.

«The mole leads an invisible job: it digs passageways, and this is its life. Our Association does the same», Mr. Serik Akhanov, the chairman of Council of Association of Kazakhstan financiers has noticed. Many experts do not know what it will be with world (global) and domestic economy in the current year, but the experts of APF-s (Accumulative Pension Funds) can calculate the amount of pension savings for the imaginary worker up to the end of 2047 if he/she starts working in 2008. The other question is how far these prognostications could be correct. The final point on the diagram of approximate calculations of monthly pension payments under the sum of 5900 tenge during forty years lies in 2047. Not all the leaders of APF-s will be among alive in 2047.

«We are in the process of continuous dialogue with authority. We are trying to protect the investors' interests as much as possible», Mr. Akhanov has emphasized. «The main thing is to save pension accumulations».

«Our model is based on a system of guaranteed deposits; the guaranteed payments in the West», Mr. Nurzhan Alimukhanbetov, the Vice-president of Boards of JSC «Accumulative Pension Fund of National Bank» has noted. It means that the state guarantees safety of pension deductions and compensates inflation only. Thus, the diagram offered to attention of MASS-MEDIA shows that the imaginary pensioner of 2047 receives 37.312070, 00 tenge, where the investment income accounts for 92 %. It was suggested to choose carefully APF in order the Fund could guarantee the big investment income and similar parameters in the future.

At present more than 3,5 millions of population is covered by accumulative pension system. The Top-managers of APF-s were asked on what is their attitude to the idea of state pension for every person who reached the pension age, as the millions of citizens are not covered with accumulative pension model. Mrs. Svetlana Khairullina, the Vice-president of Boards of JSC Accumulative Pension Fund «Capital» has stated their common position: «Such system exists, and we are acting to save it».

In accordance with the AFS report (Agency of Financial Supervision) on March 1, 2009 27,72 % of pension assets were invested in public securities of Ministry of Finance of the Republic of Kazakhstan and National bank; 44,13 % of pension assets were invested in non-public securities of Kazakhstan emitters; 6 % of pension assets were invested in the contributions in National bank; 6,55 % of pension assets were invested in public securities of foreign countries; and 13,16 % of pension assets were invested in non-public securities of the foreign emitters. Many of these contributions seem to be risky in light of modern realities, the mechanisms of storage of pension money are under the threat of depreciation. For example, how could Ministry of Finance redeem the securities, if in 2009 financial year it is planned the budget deficiency in 574 billions tenge.

During last eleven years all the pension payments and transfers into insurance organizations have made 100,927 billions tenge, or 6,7 % from saved 1500 billions tenge. In other words, the accumulation of money prevails its expenditure, while the serious expenditure of the money didn't begin yet. However, during the same period of time the charged commission have made 83,534 billions tenge, or 6 %. It turns out that the financial support of accumulative pension system itself (there are about 15 APF-s) made as much as it was paid to the investors. In general, there is a problem and it should be solved, because of pension question is one of fundamental bases of the modern society.