Pension System Reform in Emerging Countries

Abstract

In 1998, Kazakhstan introduced a funded pension scheme instead of the former Soviet Union’s pay-as-you-go (PAYG) system. In 2013, there was another significant reform—the creation of a government-owned single accumulated pension fund (SiAF), the only legitimate fund to collect mandatory contributions. While the 1998 reform has been widely covered, there are few discussions about the 2013 reform. This article aims to fill this gap in the literature by examining the performance of the funded system prior to the reform, analyzing the reasons for the single fund creation, and assessing the impact of pension market monopolization. Results show that the Kazakhstani pension system was profoundly evolving prior to 2008, but after the crisis its performance significantly deteriorated, which raised questions about the ability of pension funds to provide adequate benefits in the future. This deterioration in performance and doubt about the future contributed to the creation of SiAF. Despite the fact that the 2013 reform aimed to improve the performance of the pension system, it also brought new risks that make the achievement of its primary goals uncertain.