Working Group should focus on 5 tasks for pension reform – opinion
The Atameken NCE RK welcomes the decision of the Ministry of Labour and Social Protection to continue the work of the Working Group to improve the pension system.
Indeed, the range of issues under discussion is very wide: from the possibility of using part of the accumulated funds for housing to the tax burden on business. Even the most qualified experts will not be able to answer all the questions in 2.5 months.
"The Working Group discussed various options for models of pension systems, international experience. Some experts expressed opinions to introduce mandatory contributions to housing in addition to existing pension contributions, or provide loans through savings on a repayable basis. All the suggestions are based on international experience. But the question is, to what extent is it possible to use these models?" Yuliya Yakupbaeva, Deputy Chairman of the Board of the Atameken NCE RK, said.
If we consider the practice of Singapore: the pension system in Singapore as well as in our country is accumulative. But the amount of mandatory contributions is much higher - 37 percent. Plus, the income tax is up to 22 percent.
The average salary in Singapore in 2019 was 4,000 dollars. That is, the possibility of using funds for treatment, education, and housing from our savings is economically justified.
In our case, the situation is not so optimistic. 69% of the Unified Accumulative Pension Fund (UAPF) depositors have savings of up to KZT 1 mln. If the cost of the apartment is KZT 10 million, the down payment will be about KZT from 2 to 3 million. Thus, the majority of Kazakh people will not have enough even all pension savings to solve the housing issue.
"On the other hand, citizens of Singapore can only count on their savings. There are no payments on social security and medicine guaranteed by the state. These aspects are an area of responsibility of the citizen," she said.
In Kazakhstan, some citizens pay the Single cumulative payment (1 MCI). At the basic level, a significant part of social and medical services is financed from the state budget. An additional system of social guarantees is being built through contributions to the State Social Insurance Fund (SSIF) and Social Health Insurance Fund (SHIF). Kazakh people have the right (but not the obligation) to accumulate funds for housing in the Zhilstroisberbank, open educational deposits under the programme of Finance Centre JSC. There is a state premium in both types of savings.
Are we ready to switch over to the full copying of the Singapore experience without a general salary increase? Probably, we aren’t. The issue must be addressed comprehensively.
"The same situation with the payroll load. Thanks to the support of the President of Kazakhstan, the introduction of mandatory pension contributions by the employer was postponed until 2023. But due to other contributions, the burden on the Wage Fund will still increase to 41% in 2025. The Atameken NCE RK proposed to balance this growth by gradually reducing, and then abandoning, the social tax. In this case, the total load will be kept at a level no higher than 32%. All kinds of settlement options were discussed at the site of the Ministry of National Economy," Yuliya Yakupbaeva said.
According to the experts’ opinion, to make the pension system reform effective, the Working Group should focus on the following tasks:
- develop incentives for employers and employees to make regular mandatory payments;
- increase the interest of the contributor in his pension planning;
- revise the parameters of the minimum standards; make calculations based on real wages;
- optimize the activities of social support institutions (UAPF, SSIF, SHIF);
- balance the load on the Wage Fund with the real needs of the social security of the population.
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