Country OverviewThe Republic of Kazakhstan is a transcontinental country in Central Asia and EasternEurope, the vast majority of its territory being located in Central Asia. With its territory of2,727,300 sq km (1,053,000 sq mi) ranked as the 9th largest country in the world, it is also theworlds largest landlocked country. Kazakhstan is a member of the CIS.Capital city – Astana; largest city – Almaty (former capital). National currency – Tenge (KZT).
Country Overview (continued) Politics and Economy Population Population: 16.8 mln. people Age 0-15 – 10% The Republic of Kazakhstan Structure 16-62(57) – 64% is a unitary state with (2012) 63(58) & older – 26% presidential regime Working population (APFs’ members) (Feb. 2012): 8.5 mln. People Main industry: Oil & Gas Average monthly income (Jul. 2012): (9th place in the world) USD 712 Retirement age: men – 63 women – 58 GDP: Longevity (2011): (Jan-Jun) 2012 – 105.6% 2011 – 107.5%, or $186.2 bn average – 69.01 years 2010 – 107.0%, or $148.05 bn men – 64.23 women – 73.79 2009 – 101.2%, or $115.31 bn Natural population growth rate 2008 – 103.3%, or $133.44 bn 2007 – 108.9%, or $104.85 bn increased from 6.22% (2003) to 13.79% (2011)
Pension System in Kazakhstan1997 - reform of the pension system in Kazakhstan and establishment of the first “StateAccumulative Pension Fund” (Gosudarstvenny Nakopitelny Pensionny Fond) which thenbecame the APF “GNPF”, JSCNew pension system is based on the three pillars: PAYG pillar, the former Soviet Union heritage based upon the “solidarity of generations” where the pillar State budget is a source of pension distributions by means of taxes and other budgetary receipts. Pension distributions amount depends on the employment duration. Currently, this pillar covers those who had been employed for at least six months prior to January 1, 1998. Compulsory defined contributions accumulative pension plan (99.81% of all accumulated pension assets as of 1 Oct 2012). Pension contributions fixed at 10% of the gross monthly income are paid by all employed citizens of Kazakhstan and foreign stateless individuals who established permanent residence in Kazakhstan, to their individual accounts in one of the APFs selected in contributors’ discretion. Contributors have the right to transfer their savings from one APF to another twice a year, but all savings of each member must be kept in one APF at a time. Voluntary accumulative pension plan embracing voluntary and voluntary-occupational pension contributions. This pillar is less developed.
Pension System in Kazakhstan (continued) Currently there are 11 Accumulative Pension Funds (APF) operating in Kazakhstan. The APFs in Kazakhstan are licensed to act also as Accumulation of the Asset Management Companies (AMC). They manage pension Pension Assets & assets of their members (contributors), and also have their ownAsset Management assets and capital that are accounted for separately (Chilean Chilean model). model Pension assets are accumulated and accounted for based on the Unit-Linked Plan Unit-Linked Plan i.e. the cash value of pension contributions Unit- Plan, varies according to the current net asset value of the underlying investment assets. It allows protection and flexibility in investment. The APFs have three income sources sources: Income Structure 1. Monthly commission fee on accumulated pension assets (≤0.05%, GNPF’s current fee is 0.0375%) 2. Monthly commission fee on investments return (≤15%, GNPF’s current fee is 12%) 3. Return from investments of own assets
GNPF Shareholder The National Bank of the Republic of Kazakhstan 100% 100% GNPF is the only APF with direct GRK participation through the National Bank’s share NBRK intends to privatize GNPF and, therefore, is looking for a strategic investor that will acquire the control stock and help to further improve the Fund’s already strong position by: improving the Fund’s corporate governance; refining the existing risk management system; bringing in know-how in investing pension assets; and providing access to international capital markets
Regulation The APFs’ activity is licensed and regulated by the Committee of the National Bank of the Republic of Kazakhstan for Control and Supervision of the Financial Markets and FirmsThere are three main prudential regulations established and controlled by theCommittee: K1 - minimum capital requirement K2 - annual average weighted investment return benchmark for the last 60 months Limits on pension assets investments
Foreign Investor: Legal Issues Per the Law of the Republic of Kazakhstan On the Pension Provisions in the Republic of Kazakhstan (The Law), Article 36: A non-resident investor shall: non- shall be a legal entity have a minimum rating as set below: Rating and Moodys Dominion Japan Credit Standard and Investment Capital Investors Fitch Bond Rating Rating Agency Poors Information Intelligence Service Service (DBRS) (JCR) (R&І) ВВ- Ва3 ВВ- BBL BB- BB- BB- Legal entity registered in an off-shore zone* or the one having affiliates registered in off- shore zones shall not act as a shareholder of any pension fund in Kazakhstan *All restricted off-shore zones are listed in the Appendix A
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