Pension savings of Kazakh citizens represent ultra-long-term money that is invested continuously over 20–40 years, whereas bank deposits operate on a completely different mechanism that is not suitable for this purpose, reports infohub.kz.
Today the country faces a striking contrast: banks offer deposits with interest rates of up to 20% per annum, while the National Bank of the Republic of Kazakhstan, which manages the assets of the Unified Accumulative Pension Fund (UAPF), shows a return of 6.17%. Against this backdrop, Kazakhs may reasonably ask: why can't pension savings be transferred to bank deposits?
However, as explained by Yelena Bakhmutova, chair of the board of the Association of Financiers of Kazakhstan (AFK), in an interview with the UAPF's official YouTube channel, such a decision cannot be considered optimal.
The point is that pension money has a long investment horizon. It generates additional income until a person retires, that is, over 20–40 years, and sometimes longer.
Deposits, by contrast, aim to preserve and grow savings over a short term. The highest interest rates are offered for deposits opened for 3–6 months or at most a year. No bank could afford to pay 20% per annum for 20–40 years.
It is also worth remembering that all money held in the Unified Accumulative Pension Fund is guaranteed by the state, amounting to almost 28.5 trillion tenge. For deposits, the guarantee per depositor does not exceed 20 million tenge.
What this means for citizens: UAPF savings have maximum protection. Even if the National Bank or private companies suffer heavy losses, a person upon retirement will at least receive all their savings accumulated during their working life. If the bank to which pension savings were transferred goes bust, the depositor will typically be returned no more than 20 million tenge if the funds were held in a savings deposit. For term and non-term deposits, this amount is even lower – 10 million tenge.
Moreover, as the expert notes, such a volume of savings is a powerful investment tool.
"This is a huge potential that can be invested, including through the state (government securities), or through debt instruments, thereby improving our infrastructure, and, well, developing our economy and raising the well-being of the entire population," explains Yelena Bakhmutova.
As the AFK chair notes, deposits have a short term, and through them only short-term loans can be invested. Because of this, the competitive advantage that Kazakhstan has built over nearly 30 years of the accumulative pension system is lost.