- 1. What is the purpose of revising the minimum adequacy thresholds (MAT) and adopting new amounts?
The main purpose of revising the MTA calculation methodology is to strengthen the requirements for the minimum pension savings necessary to ensure an adequate level of future accumulated pensions, as well as to gradually increase the income replacement ratio at the expense of pension payments of the contributor at retirement age. In this case, the minimum international standards are taken into account. Recall that according to the requirements of the International Labor Organization (ILO), the income replacement ratio should be at least 40%.
According to the new methodology, the calculation of the MTA size will be as close as possible to real life conditions and target parameters of pension provision. This will reduce the risk of citizens not having sufficient savings upon reaching retirement age.
2. How are the minimum adequacy thresholds determined? What factors are taken into account?
According to the changes, the MTA size is determined based on target indicators of future pension payments and is calculated based on the formula for calculating the present value of monthly payments depending on the age of each contributor.
The formula includes long-term demographic (national demographic tables) and financial (interest rates of return and indexation of payments) factors. This approach is aimed at ensuring the stability and predictability of future payments to citizens.
The formula for calculating the present value of payments is widely used in international practice. It allows you to determine the amount of savings required to ensure targeted payments and is expected to reduce dependence on changes in macroeconomic indicators.
The requirements for the minimum amount of pension payments are based on socio-economic indicators. In particular: the minimum pension by age, the minimum wage. These indicators are approved annually by the law on the republican budget.
In addition, when considering the possibility of using pension savings for housing improvement or treatment, it is imperative to take into account that there is a sufficient amount left in the pension account to ensure future payments.
3. How will the changes being adopted affect future pension payments?
According to the current methodology for calculating the minimum wage, if a contributor uses pension savings in excess of the limit, he may receive only about 50 thousand tenge upon retirement in the future. This is an indicator that is approximately equal to the current subsistence level (SSL). At the same time, the current Methodology assumes that the contributor will regularly pay mandatory pension contributions until retirement age. However, in practice, contributions may not be regularly transferred or may not be paid at all. In such a case, the current SSL size may not provide the expected minimum payments. As a result, the future payment volume may be lower than the subsistence minimum. Even if contributions are regularly paid and savings are maintained at the current SSL level, a accumulative pension of about 50 thousand tenge will not even reach 15% of the current median wage.
For reference: The median wage is one of the prerequisites used to analyze the income of the country's population, which allows calculating wages both for the entire country and for individual regions and settlements. The median wage is an indicator that divides all wages into two equal parts: half of the workers earn more than the median, and the other half earn less. It more accurately reflects the income situation. However, it should be noted that it can change under the influence of various factors, such as economic growth, inflation, labor market conditions, and political decisions.
According to the new MIF methodology, if a contributor uses the part of his savings that exceeds the lower sufficiency threshold, the minimum amount of future pension payments will approach approximately 40% of the median wage. At the same time, in the new Methodology, the MIF amount does not depend on future contributions, annual expected changes in many macroeconomic indicators. The calculation is based on long-term factors. Among them are the demographic tables of the population of Kazakhstan, which are regularly updated by the United Nations on the basis of national statistics. As a result, the future pension amount for citizens will be more predictable and will gradually approach the target indicators of the Organization for Economic Cooperation and Development (OECD) countries.
According to the changes, the amount of the TPP is determined depending on the age of the contributor. As the contributor's age increases and approaches retirement age, the requirements for the amount of future pension payments also increase. This is being introduced to allow citizens to receive an income level close to international standards upon reaching retirement age. Thus, the new model brings the TPP calculation system as close as possible to real conditions and target parameters of pension provision
