The modern pension system of Kazakhstan dates back to 1997 when the Kazakh Government approved the Concept of reforming the country’s pension security system and the “Kazakhstan Pension Security Act” was adopted. The innovation consisted in developing the basics of a cumulative pension system and gradually abandoning the old, distributive, pension system.

At the end of last century, the problems of pension security became extremely burning. The reason for this was, on the one hand, the country’s transition to market system and, on the other hand, the social-demographic factors as were characteristic of Kazakhstan in the 90s of the last century. In the distributive pension system existing at that time, the high growth of inflation and unemployment, the full in GDP, and the acute budget deficit became the reasons of pension debts and their increase and the impossibility of ensuring even minimal levels of social security. Thus the instability of the distributive system of pension security based on the solidarity of generations became evident. The problems associated with the underfunded pension costs were augmented with the demographic problems. Some of these problems lay in the deformation of the population’s age structure and the speeding-up of the aging processes as a result of decreased birth rate and increased the average life expectancy in the country.

The increase in unemployment and spread of informal and partial employment led to negative changes in the labor market which resulted in a portion of the population, whose contributions were the source for the financial basis of the distributive pension system, leaving the mandatory system of pension security. With the view of decreasing the forecast growth and excessive burden on the working population, preventing deterioration in the living standards of both the working population and the pensioners, ensuring uninterrupted payment of pensions by the Government of the Republic of Kazakhstan in the future, the reform of the pension system was conducted.

The Chilean model was adopted as the basis for the new pension system. The Chilean pension system does not contain a distribution mechanism and is fully based on accumulating funds on individual accounts and capitalization of contributions. Each person joining the cumulative pension scheme is assigned a personal account on which their pension contributions are accumulated, the size of these pension contributions being set and fixed. These funds are accumulated and invested by private pension funds and, when depositors reach the pension age, these funds become the source for pension payments made to the depositors. Beside the elements of the Chilean system, the Kazakh model has embraced and adapted to its own peculiarities the practices of other systems, due to which it is considered one of the most successful systems in the world.

In 1998, Kazakhstan became the first CIS country to begin a gradual transit to the system of accumulative pension security based on personal pension contributions. The main goal of the pension reform was to build a financially steady and fair system that would consider the economic growth and proportion the labor contributions with the pensions through individual accounting of pension contributions. Apart from this, the accumulative pension system was intended to solve a number of problems: to soften the social tension, to gradually free the budget from the burden of pension payments, and to motivate the country’s citizens to earn more and to earn legally. As a result of the pension reform, the future pensions would be preserved and increased and the economy would have another institutional investor – the pension funds.

Main Stages of Accumulative Pension System Development:
1997:
Development and adoption by the resolution of the Government of the Republic of Kazakhstan of the Concept of reforming the Kazakhstan pension security system.

The “The Republic of Kazakhstan Pension Security Act” comes into force.

The resolution of the Government of the Republic of Kazakhstan “On Creation of “State Pension Saving Fund” Closed Joint Stock Company”. This Fund, “GNPF”, was assigned a special strategic role to stimulate the development of the accumulative pension system, to maximally involve the population into the accumulative pension system and to form a base of depositors of the accumulative pension system, enhance the population’s trust to the new pension system and to create competition and bases of the pension market.

1998:
Launch of the accumulative pension system and creation of pension market infrastructure.

19 January “GNPF” received the first pension deposit in the history of the Kazakh accumulative pension system.

1998 — 2002:

“GNPF” conducts its activities as a “Fund by default”: the Kazakhstan employers transfer the mandatory pension contributions to “GNPF” unless the respective employee has decided on or signed an agreement with another pension Fund.

1999:
First among the Kazakh pension funds, “GNPF” obtained a license for independent management of pension assets.

2003 - 2004:
The Fund began to provide its depositors with state guarantees equivalent to the amount of the mandatory pension contributions deposited as adjusted for the level of inflation at the time when the beneficiaries enter into the right for receiving pension payments.

The Fund determined the schemes of pension payments and provided for receiving pensions through insurance organizations;

The size and structure of the fee rate used by accumulative pension funds changed;

The responsibility of agents for paying mandatory pension contributions toughened;

Voluntary professional pension contributions introduced;

The Program of Development of Accumulation Pension System for 2005-2007 prepared and adopted.

2006:
Unified accounting center to optimize payments in the accumulating pension system created on the basis of “National Pension Center” RGKP;

Introduction of extrajudicial responsibility for the pension funds and pension assets management organizations to maintain nominal profitability of the depositors’ savings;

Transfer of pension savings from/to different pension funds through “National Pension Center”.

2007:
”GNPF” initiated the organization and holding of an international conference called “Pension market of Kazakhstan – 10 years since system reformation”, dedicated to the 10th anniversary of the Kazakh accumulative pension system.