Kazakhstan’s pension system outperforms US, Japan and China with an asterisk

Kazakhstan’s pension system has outperformed those of the U.S., Spain, Japan, South Korea, China, Saudi Arabia and other countries in many key metrics, according to the Unified Accumulative Pension Fund (UAPF). However, one critical area still lags far behind developed nations: the adequacy of pensions.

The U.S.-based consulting firm Mercer, in collaboration with the CFA Institute, recently released the 2024 Mercer CFA Institute Global Pension Index (MCGPI). This annual ranking evaluates pension systems across 48 countries. Kazakhstan ranked 24th, earning what the UAPF called a «golden mean.»

Analysts assessed the pension systems using three sub-indices: adequacy, sustainability and integrity. The evaluation drew data from reputable international sources, including the Organisation for Economic Co-operation and Development (OECD), the World Bank, the International Labor Organization and the Economist Group’s research division.

Kazakhstan scored 64 points overall, earning a C+ grade. The final score was calculated by weighting the results of the three sub-indices as follows:

• Adequacy: 45.8 points (40% weight). Kazakhstan outperformed Malaysia, South Korea, Indonesia and South Africa in this category.
• Sustainability: 73.1 points (35% weight). Kazakhstan’s score exceeded those of Switzerland, Chile, New Zealand, Finland, Canada, Norway, France, the U.K. and the U.S.
• Integrity: 80.4 points (25% weight). Kazakhstan ranked higher than Sweden, Denmark, the U.K., the U.S. and China.

Overall, Kazakhstan ranked eighth in sustainability, 16th in integrity and 41st in adequacy in the MCGPI.

Pension adequacy, which measures a pension system’s ability to provide retirees with sufficient income to maintain a reasonable standard of living, remains a significant challenge for Kazakhstan. In this crucial category, the country ranked near the bottom.

To address this, Mercer recommended several measures for Kazakhstan, including:

• Increasing support for the poorest elderly;
• Encouraging households to save more for retirement;
• Restricting early withdrawals from pension funds;
• Raising labor force participation rates among older individuals as life expectancy rises; and
• Requiring the pension system to include projections of future payments in participants’ annual statements.

In 2023, Kazakhstan first appeared in the MCGPI, ranking 20th with a score of 64.9. This year, it dropped four positions to 24th place. The Netherlands retained the top spot in the ranking, scoring 84.8 points.

In 2023, the UAPF claimed that Kazakhstan could achieve pension adequacy only by introducing a new type of retirement contribution: the employer’s mandatory pension contributions (EMPC).

The EMPC operates as a conditionally cumulative mechanism. Contributions are credited to employees’ accounts but are only used to provide lifetime payments equivalent to at least two subsistence minimums per month. Any surplus funds are redistributed to support less well-off contributors to the UAPF. The EMPC system was launched in 2024 with an initial contribution rate of 1.5% of an employee’s salary. This rate is set to increase gradually, reaching 5% by 2028.