“Current questions about UAPF”

“Current questions about UAPF”

1)   Please tell me which banks I can contact to receive target savings under the National Fund for Children program?

Decree of the Government of the Republic of Kazakhstan dated January 18, 2024 No. 16 On approval of the Rules for the formation and accounting of target requirements, target savings and payments of target savings, as well as the accrual of target requirements by authorized operators (hereinafter referred to as the AO) who open and maintain bank accounts for crediting Target savings (hereinafter – TS) transferred by the UAPF to adult participants of the National Fund for Children program in order to improve living conditions and (or) pay for education can be provided by the National Postal Operator and second-tier banks.

Thus, any second-tier bank in Kazakhstan that has entered into agreements with UAPF JSC establishing the procedure for interaction and exchange of information between the AO and the UAPF can take part in the program as an AO. Currently, authorized operators for the use of central heating are:

for housing – Otbasy Bank Housing Construction Savings Bank JSC

for education – Otbasy Bank Housing Construction Savings Bank JSC and Halyk Bank of Kazakhstan JSC.

2)   How is the dollar exchange rate determined when paying out target savings under the National Fund for Children program? Is there any commission? 

Target savings of children over 18 years of age are transferred from the National Fund to the UAPF in US dollars and are stored in the UAPF also in US dollars.

When an adult program participant decides to use his money, he submits an application to the authorized operator (AO), and the UAPF transfers his savings for subsequent crediting to a bank account opened by the authorized operator, also in US dollars. Further, when the AO transfers savings for use on housing and/or education, the money can be converted from US dollars to tenge at the rate that will be relevant at the time of transfer.

If the recipient selects the goal “Payment for education outside the Republic of Kazakhstan,” conversion of money is not required. For other purposes, the recipient converts TS payments from US dollars into tenge at the exchange rate at the time of the transfer.

Payments of target savings from the National Fund are not subject to individual income tax (IIT). In addition, UAPF does not charge any fees for its services.

  3) Who and how can use pension savings for alternative purposes?

The Social Code of the Republic of Kazakhstan grants the right to use part of the savings from the UAPF to improve housing conditions and pay for treatment if one of the following conditions is met:

• if the amount of CPC pension savings, available in the individual pension savings account (IPSA) of the CPC contributor, exceeds the threshold of minimum sufficiency of pension savings, determined in accordance with the methodology approved by the Government of the Republic of Kazakhstan;
• if the amount of the pension of established pensioners ensures the replacement ratio of the average monthly income of the recipient at a level of at least 40 percent, determined in the manner determined by the Government of the Republic of Kazakhstan. When calculating the replacement ratio of the average monthly income, the beneficiary’s income preceding the retirement date is taken into account, but not more than the average monthly income in the republic (in this case, up to 50% of pension savings can be used);
• if the contributor of compulsory pension contributions (CPC) has entered into a pension annuity agreement with an insurance organization (in this case, it is possible to use the entire amount of savings available in the IPSA);
• if the CPC contributor is a recipient of pension benefits for length of service. Pensioners who have retired for length of service can use the entire amount of their pension savings formed at the expense of the CPC to improve their housing conditions or pay for medical treatment (a detailed list of persons entitled to pension payments for length of service is defined in Article 212 of the Social Code).

Each contributor and beneficiary has the right to decide for themselves how to manage their savings: to direct them to solving current issues or to leave them for provision at retirement age. First of all, this concerns contributors whose savings exceed the minimum sufficiency threshold (MST). It should be understood that the MST is the minimum amount of pension savings formed at the expense of the CPC, necessary to provide a monthly pension not lower than the minimum pension. This is an estimated amount of pension savings, which is determined based on socio-economic indicators, as well as forecast calculations of future pension contributions and investment returns. Thus, the MST is the minimum that must remain in the account so that the contributor, upon reaching retirement age, receives pension benefits not less than the minimum pension.

In order to find out the size of your future pension, you can use a forecast pension calculator, which will show what your pension will consist of, calculate it according to three scenarios: pessimistic, realistic and optimistic, which will help the contributor to get acquainted with all possible options that take into account the expected level of real investment return. In addition, this tool will help each contributor to calculate what the pension will be with and without early withdrawals. You can learn more about the Pension Calculator service on the website of UAPF JSC https://www.enpf.kz/ru/elektronnye-servisy/calcs.php

         4) What should contributors pay attention to when choosing a company to manage pension assets?

The Agency for Regulation and Development of the Financial Market (as an authorized state body) has established special requirements for all investment portfolio managers (IPM) admitted to managing pension assets.

IPM must have a license to manage an investment portfolio, successful experience in managing client assets, positive performance results over several years, sufficient equity capital to cover possible losses when investing pension assets, etc. IPMs are entered into the register of the authorized body. In addition, they are required to conclude an agreement on trust management of pension assets with the UAPF, as well as a tripartite custody agreement with the UAPF and a custodian bank.

Currently, the register of IPMs that meet all the requirements for managing pension assets includes five companies: Jusan Invest JSC, BCC Invest JSC, Centras Securities JSC, Halyk Finance JSC, Halyk Global Markets JSC.

IPMs have their own investment strategies and independently determine the structure of the investment portfolio within the investment declaration. They decide which financial instruments to invest pension assets in within the list permitted by the Rules for the implementation of investment portfolio management activities (approved by the Resolution of the Board of the National Bank of the Republic of Kazakhstan dated February 3, 2014, No. 10).

Before transferring part of your pension savings to IPM management, it is recommended to study their investment declarations, investment portfolio structure, and investment performance indicators on the UAPF website. Information about IPMs, their strategy, and commission fees (which cannot exceed 7.5% of investment income) is posted on the enpf.kz website in the Services section – Investment Portfolio Managers Registry. Detailed statistics on the transfer of pension savings to IPM management are available in the Indicators section – Transfer of Pension Savings to Management Companies.

5) How can you calculate the size of your future pension?

UAPF contributors can use a convenient tool – the Pension calculator, using which you can not only independently calculate your approximate future pension, but also receive information on the calculation of the insurance premium and insurance benefit from the insurance organization in accordance with the latest changes in the pension legislation of the Republic of Kazakhstan.

The calculator is available in two types. “Current” is a more simplified version, with the help of which those who retire in the coming year can calculate the amount of payment of pension savings formed through compulsory pension contributions. The “Forecast” calculator will not only calculate the estimated size of the future pension, but will also show what it consists of and calculate it according to three scenarios: pessimistic, realistic and optimistic, which will help the contributor to see all possible options that take into account the expected level of real investment profitability.

When calculating, the calculator will take into account all components – basic and PAYG pensions; 10% CPC; 5% COPC and voluntary pension contributions.

To obtain the amount of the future pension in the forecast calculator, you need to do a few simple steps – fill in all the fields: date of birth, gender, length of service, length of participation in the funded pension system, enter the amount of savings to date and the average salary for the last time. And to get the result – click on the “Calculate” button. When using the calculator through your personal account, almost all the fields will be filled in automatically, and the calculation will be more accurate. If the projected amount of pension savings exceeds the minimum sufficiency threshold, a notification will appear about the possibility of withdrawing them to improve housing conditions or pay for medical treatment.

Also, if there are sufficient pension savings for contributors, the function “Transfer of savings to life insurance companies (LIC)” is provided for concluding a pension annuity agreement. It is important to remember that the results of pension calculations are preliminary for the current calendar year, and the final calculation will be made when you contact the insurance company.

You can learn more about the Pension Calculator service on the website of UAPF JSC https://www.enpf.kz/ru/elektronnye-servisy/calcs.php

Video material in Kazakh and Russian is available here: https://youtu.be/lt6g9fOo7Qs https://youtu.be/fuXzZxKKPbs