But how can the problem of the majority be solved by merely restricting the minority, which does not have such a problem? Most experts believe that the government should have long ago initiated serious pension system reforms instead of pretending to be concerned.
Freedom of choice
Economist Rakhim OSHAKBAEV points out that most contributors do not have sufficient savings for a decent pension, so systemic solutions are needed. Simply restricting access to pension funds for those who are already earning well is not a solution.
- I am against the ban on using pension surpluses. The essence of pension savings is that this money belongs to the contributor. After all, it is their personal funds that they set aside for the future. The authors of this idea are worried that by withdrawing their pension early, people will be left without means in old age. But if we look at the real situation, most Kazakhs with small savings are already cut off from the possibility of withdrawing funds due to the increased threshold of sufficiency. On the other hand, many of those who have already withdrawn surpluses do not particularly need a pension. The ban will only affect those who are just beginning to accumulate decent savings. And then, why can the state take this money without the people's permission for various projects whenever it wants, but a person cannot use their savings to solve, for example, a mortgage issue? The ban on using pension surpluses will be not only unfair but also ineffective,
Close the gap immediately!
Financial analyst Andrey CHEBOTAREV is against the idea of using pension surpluses. In his opinion, it undermines the foundation of the pension system.
- I predicted back in 2020 that sooner or later this practice would be stopped. And I am glad that this issue has been raised now. If pension money is allowed to be withdrawn, it will create a hole in the pension system through which money will leak into the real economy. Firstly, there is the inflation factor: prices rise thanks to this money. Secondly, it reduces the future savings of the pensioners themselves. I understand that we have a huge crisis of trust in pension policy in general and in the ENPF in particular, but handing out money is not a solution; it does not increase trust in any way. Although not many people use this tool, it distorts the very essence of the pension system. Pension money should only go for pensions. Why can some people withdraw it?! - Chebotarev reflects.
But he also emphasizes that the “hole” is not the biggest pain of the pension system. The main problem of the ENPF is the 1.9 million people who do not participate in the accumulation system. In old age, they will only receive a basic pension, which currently amounts to 42,761 tenge.
- This is what the pension fund should focus on first - increasing trust and engagement of the population. Currently, almost a third of the budget goes to pension payments. That's a lot. Imagine that current taxpayers are paying pensions to retirees. Do you want our children to pay us a pension that we could not accumulate ourselves? The accumulation pension system is maximally fair and honest: you save as much as you earn for your pension. Our children are not obliged to pay us a pension! This is my opinion,
The weather won't change
Deputy of the Mazhilis of the III-VII convocations, Doctor of Economic Sciences Amanzhan JAMALOV is confident that the ban on early withdrawals will not change anything in the pension system, as most of those who could have taken advantage of this opportunity have already done so.
- Currently, people in the ENPF do not have large sums of money that can be withdrawn, so this is a question of nothing: if this opportunity is closed, it will not matter anymore. On the contrary, at least what will turn into wrappers tomorrow, people today have in the form of teeth in their mouths, roofs over their heads, etc. This was one of the wisest decisions of the president! People used this money for good purposes,
The system's fiasco
After gaining independence, Kazakhstan operated a solidarity pension system inherited from the Soviet Union. Its main principle is that current taxpayers pay pensions to current retirees.
In the late 1990s, the country faced not only a crisis, a reduction in budget revenues, and hyperinflation but also a mass exodus of the working population, leading to an aging nation. Therefore, the authorities, at the recommendation of the World Bank, happily transitioned to a funded pension system, where the size of the pension depends not on the budget's capabilities but solely on how much money the worker has accumulated in their account upon retirement.
At the moment, we are in a transitional period. Currently, pensions are formed from three parts: the basic and solidarity parts are allocated from the state budget, while the ENPF provides the accumulated part. However, the solidarity part is only paid to those who started working before 1998. Those born after 1980 will not receive it. Future generations of retirees will receive only their savings in the ENPF plus a small basic pension determined by their work experience. For example, if a person has officially worked for less than 10 years, the basic pension will be only 54 percent of the subsistence minimum, which is currently 25,000 tenge.
Oshakbaev cites official statistics from the fund as evidence that the government is not seeing the problems where they exist.
And it shows that even if 1 percent of wealthy contributors are subjected to “suffocation,” it will not bring pension happiness to the remaining 99 percent, as 60 percent of ENPF contributors, or 6.5 million Kazakhs, have savings of only up to 1 million tenge. And this is after 25 years, which the accumulation system celebrated last year! Another 25 percent have from 1 to 3 million tenge, 11 percent of contributors have 3-5 million tenge, and 3 percent have 5-8 million tenge. Only 1 percent of contributors have savings exceeding 8 million tenge! Plus, 1.9 million employed Kazakhs do not participate in the funded pension system at all.
By the way, for a pensioner to receive at least 200,000 tenge per month until death, they need to accumulate about 45 million tenge. And to accumulate 45 million by the age of 63, one must work for 45 years and earn at least 900,000 tenge per month during that time! So the current pension system simply breeds poor pensioners. Therefore, it is no secret that by 2040, Kazakhstan will face a serious social crisis.
- All these figures and facts unequivocally condemn the pension system of Kazakhstan: it is unviable and cannot provide a decent pension for the overwhelming majority of Kazakhs. Considering the demographic forecast and the inefficiency of the accumulation component, I would suggest considering a transition to a solidarity pension system, which would be more sustainable and fair,
Back to the future
According to the forecast of the Ministry of Labor's labor resources center, by 2050, the population of Kazakhstan will grow to 25.5 million people. At the same time, there will be 4.8 working people for each pensioner. According to Oshakbaev, with such a ratio, the solidarity model is effective.
Amanzhan Jamalov also advocates for the revival of the solidarity system, which is not dependent on the volatility of the stock markets.
- The main idea of the current accumulation system is that the working population pays contributions that are invested in the stock market and generate annual income, protecting savings from inflation and allowing for an increase in the future pension amount for the worker. In other words, this entire system is based on the existence of the securities market, on the movement of stocks up and down. And asset managers in this global market could earn well. But to always make money in the stock market, one must be a seer or a deputy of God! Therefore, the accumulation pension system is ineffective today and will remain so for a long time. Last year, the ENPF's profitability went negative. I emphasize: this is not about the money of private investors, but about pension savings; this is a matter of survival in old age. I believe that the state cannot absolve itself of this social responsibility under any circumstances. It will still be the main respondent in this matter. Therefore, it is necessary to return to the solidarity system. This is the most proven and reliable way,
In 2020, Mazhilis members repeatedly called on the government to return to the solidarity system. But this issue was not even considered. Our interlocutor named the factors preventing a return to the previous model.
- I think it is not because everyone in the government is against it, but simply the inertia of the officials' thinking. We have it in our heads that a solidarity pension is a relic of the past, the state is a bad manager, and so on. Under such slogans, we transitioned to the accumulation system, although most developed countries still use the solidarity system as the main form of pension provision, supplementing it with elements of the accumulation system,
Togzhan GANI, Astana