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"Retirement should be worthy," the newspaper "The New Generation" from 06.12.2013

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"Retirement should be worthy," the newspaper "The New Generation" from 06.12.2013

Pension should be signified.

One of the main goals of any state is to ensure the welfare and health of its citizens. All social policies that are designed to carry out the state structures are built on the same basic principle. But today, in this article we will focus on the system, which is one of the most important sectors of the economy of the state and at the same time realizes the basic constitutional guarantee - material support of pensioners.

 In developed countries, social security is an essential element of a modern pension system, which plays a major role in the socio-economic and socio-political development of any country. Many countries with  strong and developed economies over the last 15-20 years have taken steps to modernize their pension systems. Their goal was to adapt to the changing demographic and economic conditions, as well as giving the pension system more flexibility and financial stability.

In the first stages of these transformations in countries such as Germany, Italy, USA, France and Japan, attempts to increase pension payments by increasing the size of contributions were held, which caused the active opposition of both workers and employers.

The second area of ​​reforms was to increase the retirement age, while maintaining the right of early or flexible retirement. These initiatives have found legislative expression in individual countries, for example, in the United States the retirement age for men and women increased during 2000-2027 from 65 to 67 years, in France – up to 62 years, in Japan - for women in the period of 2018- 2030 to 65 years, for men - ??? during the 2013-2025 period.

The third area, used by France, Germany, Netherlands, and Austria to increase financial flows to the pension system is to increase the base salary, with which you make the contributions by the inclusion of bonuses and vacation benefits.

An important measure to improve the balance of pension systems is the legislative prolongation of required work to get the maximum pension. For example, in the UK since the late 1990s the pension began to be calculated based on the salary for the entire period of employment, and not for the last 20 years of the highest earnings. In France, it is moved to calculate earnings for 25 years, giving up 10 highest wage years of work experience, with the experience to assign a full pension increased from the age of 37.5 to 40. Italy went on to accrue a pension based on the salary for the entire length of service, and not last five years as it was before.

Another area of ​​pension reform in a number of countries has been the introduction of mandatory professional storage systems under state management and control - in the United States, Britain, France and the Netherlands - and stimulation of the creation of additional voluntary pension systems, both professional and personal.

From the extensive international experience it is known that most of the developed countries with pension reform used a combined scheme, but it is funded pension schemes of the population which are becoming increasingly popular and are an effective tool for promoting economic growth. Financial institutions, built on a funded scheme, coexist harmoniously with the earlier public PAYG pension programs.

Thanks to the pension reforms citizens around the world   have already had an opportunity to participate in shaping their future retirement savings by investing them in various financial institutions. World experience shows that the development of private pension coverage significantly increases the economic level of the country and with it the confidence of citizens in the future.

Who can take care of us better than we do? And when are we to do it, if not in a period of financial prosperity? In the West it is very popular to say so: "Being earned, you pay the bill for food, lodging and more, what's stopping you pay yourself for older works and efforts, while you are young and full of energy ». In other words, a fairly well-developed "culture of money" in Europe and the United States a special role is to ensure their own old age. Naturally, in order to provide themselves and their families even though everything you need in the present, at least in the future, you need to earn in other words to work. To ensure employment each year a lot of different auxiliary circuits, large projects and major government programs are created. For example, the program "Roadmap for Employment-2020” operating nowadays in Kazakhstan. According to regulations, this program is designed to prevent and even reduce the growth of unemployment, reduce the number of unproductive busy people, promote the welfare of its citizens. Particular attention in promoting employment of people in the program is given to the legalization of their incomes. But let’s go back to the period replacing the life stage "of economic activity." So, a pension as here, as in the West is influenced by many different factors and circumstances. These are and demographic situation in the present and the future, and the state of the labor market and wage system, and the tax burden, and above all - part of the working population of Kazakhstan in the pension system, in other words, timely payments of the contributions as their own pension savings.

Naturally, the pension system of any country has its own characteristics, but the basis of each of them is the participation in the pension system of the three parties - the state, the employer and the employee. Today the most common is the three-tier pension system. The first level is considered to be the protection against poverty, as a rule, it is the state distribution system. This level depends neither on time nor on wages. The second level, is designed for working people, stimulates and even obliges them to take part in the formation of additional pensions. Here you can use and distribution and storage of the principles of finance. Simply put, this is the level that is designed to provide a dignified old age. And last, the third level is based on voluntary contributions, where anyone can at their own expense fund their own pensions.

Current pension system of Kazakhstan has been in existence since 1998. Then its developers have taken into account the experience of the world and pension systems, and the experience of their reforms.

 Today, prevent poverty at a basic level every citizen of Kazakhstan, who has reached retirement age, is has to get basic pension. Its size today is half the cost of living, or 9330 tenge. In the second, mandatory level pension is presented in the form of payments from the national budget, called solidarity pension, as well as in the form of payments according to pension system at the expense of mandatory pension contributions.

In the third, voluntary level pension payments are carried out from voluntary pension contributions on a funded pension system. Voluntary contributions are to enable everyone to increase their pension savings to secure additional pension benefits. To date, nearly 40,000 citizens have their voluntary retirement accounts.

Let’s have a closer look at Solidarity pensions, which are also often referred to as the retirement pensions. They now replace the revenue that is lost automatically reaching the age when it's time to retire.

 So, if you have at least six months of work experience prior to January 1, 1998 - you can count on the solidarity payments of pensions. Today it is about one million eight hundred thousand people.

Women until 2018 have the right to retire after 58, men - after 63 years old. Everything is clear about the age of the men, but with regard to women's retirement age, there are some amendments. In accordance with the newly adopted Law "On Pension Provision in the Republic of Kazakhstan" in the period from 2018 to 2027 retirement age for women will be increased annually by 6 months and, ultimately, will increase to 63 years. In addition, women who have given birth, adopted 5 or more children and raised them to the age of eight are entitled to retire at the age of 53. Amount of the cumulative pension depends on the length of service prior to January 1, 1998 and the average monthly pre-retirement income. Full pension is granted in the presence of the seniority of 20 years for women and 25 years for men and 60 percent of the average monthly income in any three consecutive years since 1995. The maximum size of the average monthly income in the appointment of the cumulative pension today is 39 monthly calculation indices, or 67,509 tenge. If seniority is more than required, the pension is increased by one percent for each year in excess of the required, but it can not exceed 75 percent of monthly income.

If a person does not have full seniority, the amount of the cumulative pension will be calculated as a percentage of the full pension in  proportion to the length of service, existing on January 1, 1998. For example, if a woman on January 1, 1998 has experienced in 15 years instead of 20 years required, the size of her cumulative pension will be three-quarters of the full pension. Pension level of solidarity system participants in recent years has seriously increased. The minimum size of pension payments increased by more than 10 times since the beginning of the pension system of independent Kazakhstan, namely 2440 to 28,396 tenge, average - with 3964 to 40,298 m, the maximum - from 7256 to 59 962 tenge. Respectively, spendings on pension plan increased. During the period from 1999 to 2013, taking into account the basic pension payments government spendings have increased by 9.3 times and this year amounted to 919.0 billion tenge. In this case, the state can not be removed with the task of ensuring the adequacy of pension contributions increasing the standard of living in Kazakhstan. Pension should ensure that the able-bodied could provide themselves with at least the bare essentials, and, on the other hand, it is important to ensure proportion matching to income in the period of employment and after its completion.

 This figure is called the rate of substitution. On the recommendation of the International Labour Organization, this amount should not be less than 40 percent of the amount of lost earnings. In recent years, in the country there is a tendency to reduce the replacement rate: in 1998 - 46.4 per cent, in 2013 - 44.6 percent. This is primarily because the younger generation has been retiring, whose experience up to January 1, 1998 has no required number of years. In such circumstances, there is a prediction that the existence of solidarity payments will stop in about 2043. Therefore, it is funded pension system that is becoming increasingly important in ensuring citizens' pension payments. Therefore the main task of the pension reform in our country is to create conditions under which everyone during his professional experience could save it before a dignified old age.

It is necessary to say a few words about the social policies that promote a healthy situation in employment of people approaching retirement age. Again, it is useful to mention the experience of developed countries. In the West, special working conditions are widely practiced for older people such as working from home and flexible working hours, and support skills, as well as assistance in taking care of health. With the approaching retirement age, there is a move to a different position, a different job, less severe type of activity.

Such opportunities are available to citizens practically in most of EU countries. To reduce unemployment among the elderly, public works, options, partially subsidizing employment quotas for jobs, free or concessional assistance in retraining or job search, as well as preferential loans to build their own business are suggested. There is an Interesting fact: to support the development of such programs, a few years ago, the French government decided to develop their own strategy for the employment of older each company on a mandatory basis, due to which the number of employees has exceeded 50 people.

In Kazakhstan, due to the gradual increase in the retirement age for women, the Government approved a comprehensive plan to promote the employment of people over 50 years old "Initiative 50 +". By "Initiative 50 +" every citizen of Kazakhstan over 50 years can count on employment within any of the country's ongoing government and industrial programs. The plan includes measures for use of women's labor using remote forms of employment, the development of labor at home, encourage entrepreneurship.

Our government has to Work hard and seriously with respect to such programs in the next four years. After all, women need to have new options to finish work and retire depending on qualifications, health, and personal preferences.

In addition, work is on to provide employment for the younger generation. Namely the youth are to retire, relying mainly on their own savings. Take the example of the program "Roadmap for Employment-2020" developed by  the Ministry of Labour and Social Protection and approved by the Government of the Republic of Kazakhstan. It aims to promote productive employment and labor income growth. This program allows you not only to find a job for everyone who was left without income, but also helps to get a new career, start a business, Offers migration from regions with low-cost capacity to more promising village, town and region, while providing housing and jobs.

In order to harmonize the standard of living, income needs with the best, you need to do a lot more work. After all, on the basis of rising incomes it is possible to improve  pensions due to a funded pension system.

By the way, the funded part of the pension system under the newly adopted Law "On Pension Security of the Republic of Kazakhstan" is concentrated. Modernization of the pension system in our country provides for the establishment of the One pension fund and a founding shareholder is the Government of the Republic of Kazakhstan, which in itself guarantees the safety of pension savings from the state.

Union of pension funds of the country in one fund, controlled by the state, will provide maximum transparency, efficiency and reliability in the management of pension assets. In addition, the investment strategy of the fund will meet the interests of the holders of retirement accounts, and interests of the state. Therefore, we can afford to rely on investment of pension savings only in profitable projects that will rely on a decent pension.

And finally, Most of us still believe that in the West it is the government that provides people such a prosperous old age, when pensioners can afford quality health care, and regular trips abroad, purchase of real estate and so on. But few people think about the fact that the bulk of the elderly ladies and gentlemen festooned with cameras on vacation - are not the representatives of the middle class, but rather wealthy people, who made their fortune in the course of employment.

After all, for their old age in the West people prepare during a lifetime. Just standing on the career path, the average European or American thinks about how and what he/she will live on in maturity. Over the course of employment, these people learn to manage their own assets, and the most important thing they seek to save and multiply.

Of course, essential in this regard is the economic and financial literacy of each individual. But even more - responsibility for own security and a dignified maturity.

Anna Tsai.

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Changed on 13 December, 2013 - 15:44
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