The legal and regulatory framework for pension funds industry includes law on "Reform of Pension System" and "On Voluntary Private Pension Funds".

According to the current legislation, three government agencies jointly regulate the pension funds industry: The National Bank of Kazakhstan (deposit operations), The National Securities Commission (operations with securities, asset management), and The State Pension Agency.

The law states that private pension funds are to be set up. The pension system in Kazakhstan consists of two major elements: The State Pension Accumulation Fund (SPAF) and The Voluntary Pension Funds (VPF).

SPAF has been established to perform functions of Pay-As-You-Go system. All employees are obliged under the law to make contributions to the SPAF, and pensions paid are established on a minimum level. Those contributions are compulsory and the current rate is 10% of the company’s wage fund.

Voluntary pension funds have been set up to be a supplement to the government’s guaranteed minimum pensions. The employees have to transfer 15% of the wage fund to the pension fund chosen by the employer. Making this contribution is compulsory. In the initial stage, when there is a lack of public trust to the newly emerging private pension funds, the Government had set up a government-owned State Pension Fund, which acts as a temporary institution. In the future, with the strengthening of the private pension funds, all pension contributions should be directed to the private system.

As of April 1998, 10 non-governmental pension funds were in operation.

The National Securities Commission has issued a special regulation on investment policy of the private pension funds. They are required to invest: at least 50% to the Government short- and medium term securities, 10% -to the securities issued by the international financial institutions, 20% and 10%- in the shares and bonds respectively of companies, included in the listing "A" of the Kazakhstan Stock Exchange. The remaining 10% should be invested in deposits in the second-tier banks; the list of such banks is subject to prior approval by the National Bank and Securities Commission.

The major objective of the asset management company is to provide professional management of the assets in the pension funds industry. As of April 1998, there were four asset management companies – National Bank of Kazakhstan for the investment assets of the State Cumulative Pension Fund and ABN AMRO Asset Management, a specialised company jointly established by ABN AMRO and Kazkommertsbank, Zhetysu, and Ametana Trade Company. The later two companies are currently negotiating their future cooperation with Kazakhstani non-governmental pension funds.

According to the estimates of the National Securities Commission, expected inflow of pension contributions into the pension funds industry may reach $60 millions per month by the end of 1998.

Though presently the investment capability of the pension funds is limited, the development of the stock market presents many opportunities for them. The government T-bills remain an extremely profitable investment despite rather low and stable yields. The A-listing of KASE, which was for a long time presented by one company only, is now growing and soon will be comprised of the most advanced companies of Kazakhstan.

We can also offer more detailed information on major elements of the pension system: private pension funds and asset management companies.