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How will the introduction of compulsory pension contributions of employers affect the pensions of Kazakhstan citizens?

CPCE

Since January 1, 2020, compulsory pension contributions (CPCE) in the amount of 5 percent in favor of the employee at the expense of the employer are introduced.

These norms were adopted by the Law of the Republic of Kazakhstan dated August 2, 2015 "On amendments and additions to some legislative acts of the Republic of Kazakhstan on pension provision".

The purpose of the introduction of pension contributions of the employer is to improve the welfare of Kazakhstan citizens, providing a decent pension size corresponding to the work experience of employees.

Thus, the individual pension account of the employee will receive 15 percent of the wage monthly: 10 percent – compulsory pension contributions of the employee, 5 percent – pension contributions from the employer's own funds.

The innovation applies to all working citizens, including individual entrepreneurs and persons engaged in private practice. CPCE shall not apply to persons performing work and services on the basis of contracts of civil and legal character; individuals of retirement age;soldiers and law enforcement officers;recipients of pension payments for years of service; retired judges who receive a monthly life annuity.

Pension contributions from employers cannot be considered as the property of individuals and are not inherited. These funds will be in the asset of UNPF and redistributed among pensioners.

We emphasize that the innovation should not be a reason for reducing the wages of workers, as working conditions and wages are stipulated in the employment contract. According to the Labor code of the Republic of Kazakhstan, any changes to the employment contract can be made only by mutual consent of the employee and the employer.

If labor rights are violated, the employee has the right to apply to the labor inspectorate at the place of work or to the Committee of labor, social protection and migration by calling 74-34-91, 74-35-72 (labour relations Department).

For the implementation of the rules on the introduction of CPCE, appropriate Rules providing for mechanisms of the calculation and transfer of CPCE and implementation of payments at the expense of CPCE was developed. Draft Rules posted on the Ministry's website (https://www.enbek.gov.kz/ru/node/360804;

 https://www.enbek.gov.kz/ru/node/360919).

For example, let's take an employee with a work experience of 33 years and a wage of 172 thousand tenge (the average wage today). For 33 years, 10 percent pension savings from the employee's salary, taking into account investment income, will amount to about 12.7 million tenge. At the same time, wage growth is not taken into account. By the time the retirement pension will be 140 thousand tenge, including the cumulative -110 thousand tenge, the base - 30 thousand tenge. However, in a similar situation due to the introduction of employer contributions (CPCE) employee pension will increase by 50 thousand tenge and it will be about 190 thousand tenge.

There are about 2.2 million pensioners in Kazakhstan. The average size of pensions on July 1, 2019 is 85 697 tenge, including base – 26 978 m, solidary – 58 719 tenge.

Changed on 24 July, 2019 - 20:28
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