A DIALOGUE BENEFICIAL TO EVERYONE!
The pension system is a topic that affects everyone, regardless of age or profession. A person’s financial stability and confidence in the future depend on how well they understand the principles behind the accumulation of pension savings.
In an interview with the Unified Accumulative Pension Fund (UAPF) as part of the "Dialogues on the Pension System" project, Yelena Bakhmutova, Chair of the Council of the Association of Financiers of Kazakhstan, discussed key changes—both implemented and planned—within the pension system. She addressed the role of personal savings, the importance of long-term financial planning, and other pressing issues.
On Reforms
Yelena Bakhmutova:
"Following a directive from the Head of State issued earlier this year, the Agency for Regulation and Development of the Financial Market began developing a 'capital market development program'—as they have termed it—which spans the period up to 2030.
The program, which was recently presented, includes a number of new proposals aimed directly at improving the efficiency of pension asset management. It is important to note that this is an ongoing reform; it encompasses both the scope of the Ministry of Labor and Social Protection of the Population—which is responsible for developing approaches to citizens' pension provision—and specific components, such as the management of pension savings.
What is new in this program? It did not emerge from a vacuum; the program has been in development since the beginning of the year, following extensive discussions with market participants—specifically, investment portfolio managers. As you may know, the option already exists for Kazakhstani citizens to transfer their savings to private management companies, should they choose to do so.
The regulator has now proposed that these management companies offer a variety of investment strategies, tailored to individuals of different ages." Currently, private asset management companies can offer three types of portfolios—high-risk, moderate, and conservative—from which an account holder can choose. Naturally, these companies do not manage the assets themselves; rather, they select specialized firms to professionally manage the accumulated funds. Throughout this process, all regulatory standards—including the safeguarding and segregation of assets, as well as the custodial separation of a firm’s own assets from pension assets—remain in place. Record-keeping will continue to be handled by the Unified Accumulative Pension Fund.
Furthermore, a new option is emerging: in the future, the National Bank may also offer account holders a more diversified portfolio structure. How is this envisioned? Essentially, account holders within this "default" portfolio will be gradually transitioned into different age-based cohorts.
On Inflation, Investing, and Performance
Elena Bakhmutova:
"Just this past month, thanks to joint anti-inflationary measures, we have managed to bring inflation down—specifically to 9.8%, which is below the 10% mark.
Over the years, there have been periodic spikes in inflation, periods of instability, and even crises; therefore, performance should be evaluated over a longer timeframe. Returning to the portfolios: for a high-risk portfolio, it is appropriate to assess performance over a period of about five years. For a moderate portfolio, a three-year horizon is suitable, while a conservative portfolio can, in principle, be evaluated on an annual basis. It really depends on the specific type.
As for how performance is measured—private asset managers operate against benchmarks, a standard that is currently in effect. If they deliver returns in line with these benchmarks, it serves as an indicator that their management is effective." In other words, if fund managers achieve a certain level of return, that’s excellent; if the return is lower, it means the manager is inefficient. It is very straightforward to track performance here. Previously, the National Bank did not have a benchmark. However, under the current proposal, the Bank will delegate asset management; the entities receiving these mandates—whether they are foreign or domestic managers—will operate against specific benchmarks tailored to the markets they manage or the structure of the mandate they have been assigned. Consequently, the National Bank will effectively transition to a system based on benchmarks.
On personal responsibility and the importance of monitoring pension savings
The modern pension system relies on a tripartite responsibility shared by the state, the employer, and the individual contributor. Regular pension contributions, along with the investment income generated from them, play an increasingly vital role in securing one’s financial well-being after retirement. Today, contributors can monitor their incoming contributions, the total value of their savings, and any accrued investment income through the digital services provided by the Unified Accumulative Pension Fund (UAPF). Such oversight helps in identifying potential errors in a timely manner, tracking the growth of one’s savings, and evaluating...
