Assessment And Ways For Increasing Of Effictiveness Of Pension Contributions’ Capitalization Mechanism In Russia And Kazakhstan

Abstract

Karen Avakovich Tumanyants - Volgograd State University.

E-mail: TumanjancKA@volsu.ru

Galina Vladimirovna Timofeeva - Russian Academy of National Economy and Public Administration under the President of the Russian Federation.

E-mail: timoff62@mail.ru

Saule Zhumanovna Intykbaeva - New Economic University. T. Ryskulov.

Email: saule_54 @ mail.ru

Anna S. Elkin - Volgograd State University.

Email: anya_elkina@mail.ru

The aim of the research is to assess the effectiveness of pension contribution funding mechanism in Russia and Kazakhstan and to suggest ways for its improvement. The opportunity to compare data of two countries that have similar pension systems and social, economic, cultural and institutional features increases objectiveness of conclusions. The results of research show the negative effective yield of pension assets in both counties for the period from 2005 to 2013. The substantial part of the Russians and the Kazakhs don’t invest into the funded part of pension. The investing of pension assets doesn’t result in increasing of capital availability for the real economy of these two countries. Moreover, funded pension investments do not decrease risks of the imbalance in the state budget in the long run. Thus, the effectiveness of pension capitalization mechanisms is low. The reason for that is low propensity to risk of pension funds caused by some particular characteristics of national pension systems. Firstly, Russian law obliged pension funds to cover losses of investments at their own expenses. The Kazakh funds have to compensate negative difference between factual yield and its normative rate. Secondly, due to behavior of clients funds are obliged to follow the loss aversion strategy.    The results of the research can be applied by the state authorities by designing of pension contributions investing rules. Besides, some statements may be useful for optimization of control over pension funds. The authors came to conclusion that it is possible to increase the effectiveness of funding mechanism in Russia and Kazakhstan by introducing the requirement about index investment of pension assets. To lower the risk of slump of pension savings value just prior or at times of retirement it is proposed to apply “life-cycle” approach. According to this approach, in investment portfolio of young people the risky securities should prevail, whereas the portfolio of people close to retirement should consist primarily of reliable low-risk assets.