Elena Bakhmutova: The pension system should be improved

Sept 27. Kazpravda

By Sergei Volkov

Elena Bakhmutova: The pension system should be improvedThe reform of the pension system in Kazakhstan brought up controversies in the community and the key provisions of the pension legislation continue to raise more questions. In an interview to our correspondent, the deputy chairman of “Samruk -Kazyna” National Welfare Fund Elena BAKHMUTOVA shares on some aspects of the pension system modernization in Kazakhstan.

– Kazakhstan’s pension system was considered one of the most progressive, international experts noted it more than once. However, since 1998, with transition to pension accumulation system a lot has changed. Do you think it’s time for modernization in it? – The transition to the accumulative pension system was revolutionary enough 15 years ago, we may say. The expediency of placing the primary responsibility for retirement income on the worker himself is generally not disputed by critics of the savings system, as it fits into the basic principles of market economy. However, the extent of responsibility shifted from the state and the employer onto the employee’s shoulders needs a reasonable adjustment. Formation of a three-tier system of pension security underlay the concept of pension reform 15 years ago. At present the three-tier system, i.e. a system of shared responsibility for pension provision of the state, the employer and the employee is under adaptation to the current market conditions.

We have to admit that a voluntary professional pension scheme of persons employed in industries with hazardous working conditions is not yet developed enough. It was intended to provide an increase in pension savings from voluntary pension contributions by employers and allow the employee to retire early, at the age of 53-55. However, in practice, about 4 000 people are the participants of this system, and their accumulations barely exceed 100 million tenge.

The reform of the pension system implies mandatory occupational pension contributions. It means that pension contributions will go to the individual pension accounts of employers in hazardous conditions, of which 10 % are mandatory pension deductions from the worker’s income, and 5% -are the employer’s mandatory professional contributions. With uninterrupted pension savings for over 30 years, the employee will be able to save enough money for an early retirement.

– How will the transition to mandatory occupational pension contributions tell on employers?

– Under the legislation, the employers paying voluntary professional pension contributions have tax preferences. Therefore it should not lead to an increased burden on the employer.

– One of the most mooted points of the pension reform has been creation of the Unified National Pension Fund (UNPF). Much has been said about its benefits, but its investment strategy remains unclear. Do you think it will be able to address the  long-standing concern over the investment return?

– The issue of return is inseparable from the amount of risk. The higher return on the instrument, the higher the risk and vice versa.

To raise the efficiency of investment strategy for UNPF assets under the new law, a council for Pension Assets Management will be established under the RK President, comprised of representatives of the state, financial market, as well as independent experts. They will form the investment policy and set the parameters in the investment of pension assets in different classes of financial instruments.

– There is still a sense of insufficient awareness of the intended innovations. Doesn’t it create a ground for social tensions?

– I think it’s a matter of a proper outreach work. That’s what Samruk- Kazyna , a largest employer in the country, is doing. There are corporate sites and publications for it. This April a meeting of the Discussion Club «Expert» «Samruk- Kazyna » on » Modernisation of the pension system of the Republic of Kazakhstan » was held, attended by government representatives , our MPs, members of NGOs , TU and the media.

– Over the last year several social innovations were initiated in the legislation. Are they reflected in the social policy of the Fund?

– Of course they are. Social responsibility is a key indicator of JSC «Samruk -Kazyna». Due to changes in the legislation regarding payment on maternity leave, in April 2013, the company amended the policy of social support to its employees. It was recommended to the company in accordance with the Labour Code of Kazakhstan Republic to pay the maternity leave, also the leave to employees who adopted a newborn baby, while maintaining the net average wage.

Further social support measures will be developed.

– «Samruk- Kazyna» informed the public on the ongoing monitoring of social attitudes in the workforce companies. How often is it conducted?

– It is regularly conducted among the workforce by a specially created CorporateFoundationCenter for Social Partnership ( CSP) . To build a new model of social-labor relations with effective mechanisms for prevention and resolution of labor disputes, the fund implements practices determining the so -called “social stability rating” of each company. The studies are to be conducted on an annual basis.

In addition, to monitor the reaction of the staff to changes in the national legislation, social polls are conducted. This April the poll was on the attitude to raising the retirement age for women.

The CSP also has a Corporate Center for Mediation that trains professional mediators and negotiators from among the staff of our subsidiaries. It has already trained over 400 mediators and negotiators that are already at work.

There is also the Council of Trade Unions, coordinating the implementation of collective agreements and harmonizing positions of the social partners on directions of labor and social policy of the Foundation group.