ALMATY (KazTAG) – President Nursultan Nazarbayev has recommended creating a national unified pension fund in Kazakhstan.

“Improvement of the pension system requires creation of a single pension fund and transfer of all the accounts from all the private pension funds into it. Such consolidation managed by the National Bank will make management of our citizen’s savings more efficient and secure […] Part of them can be channelled into lending to the real economy through banks, aid to implementation of industrialization goals and development of entrepreneurship. We should make a decision,” Nazarbayev said during a government meeting.

Kazakhstan instituted a pension reform program in 1998. Under existing pension law, since January 1, 1998, all workers have had to contribute 10% of income – but can increase that amount – into their choice of 11 pension funds, all private, The State Accumulating Pension Fund, the only state-owned fund, privatized in 2006. To date, the assets of the country’s pension funds amount to US $17 bln (KZT 2.5 trln).

The returns vary significantly, according to pensia.kz, the official pension portal. In the first quarter of 2012, 4 of the 11 funds lost KZT 3.5 bln ($23.8 mln) while the others earned more than KZT 6 bln ($40.8 mln). However, only the state fund, with a 5.26% yield, beat the inflation rate (4.8%) over 12 months. NPF Astana fell just short, returning 4.78%. The disparity in performance, though, has little effect on how much a pensioner receives monthly.

Sergey Plotnikov, a member of the Senate committee on finance and budget issues, thinks creating a unified pension fund could boost returns. According to him, the high returns won’t come unless the government also creates more acceptable legal conditions for pensions. He proposes control of inflation and requiring broader investment in the non-financial sector as areas that need improvement.

The country’s unified financial regulatory agency oversees and regulates the pension funds. The growing demand of the pension funds for quality investment outlets triggered rapid development of the debt securities market. Pension fund capital is being invested almost exclusively in corporate and government bonds, including government of Kazakhstan Eurobonds.