Pension annuity

The classic scheme for receiving a pension is as follows. Every month we contribute 10% of our salary towards our future pension, and we receive the accumulated money only upon retirement. The retirement age is clearly regulated by law: for women it starts at 58, and for men at 63. However, there is another way to receive the money accumulated over one's working life. An alternative to a monthly pension from accumulative pension funds (APFs) is a pension annuity – a product of life insurance companies (LICs).

What is a pension annuity

Should you receive your savings from pension funds or from insurance companies? Everyone can make this choice. The advantage of the pension annuity offered by insurers is that the pension can be received three years earlier than the standard age and in parallel with payments from the APF. That is, a person who continues to work until official retirement and contributes 10% of their salary as before accumulates additional money in the APF at the same time. This means that on reaching retirement age they will receive money from both the LIC and the APF (the latest savings). The attractiveness of pension annuities lies, firstly, in the fact that they serve as an alternative to accumulative pension funds. And secondly, they provide money to those who retired earlier than the established age. Citizens who have work experience before 1998 receive a pension from the State Center for Pension Payments (GTsVP) plus a lifelong pension annuity payment. For example, if you are 55 or older, you can take out a pension annuity and start receiving a pension now, or wait until the official retirement age and then choose whether to receive a lifelong pension through a pension annuity or withdraw your savings from the APF. Under the law, a Kazakhstani's pension is calculated only up to the age of 79 and only provided that about 3 million tenge has been accumulated in the APF account. This means that those over 80 have to rely on the help of their relatives. Others, whose savings are smaller, will receive money only until their limit is exhausted. The solution to this problem may be a pension annuity (PA) contract with an insurance company, which provides for lifelong pension payments regardless of whether the savings have run out or not. While a life insurance contract protects a person (that is, their heirs) against early death, an annuity protects the insured person if they live a very long time, since the insurance company essentially undertakes to support the person who bought the annuity throughout their life.

The cost

The only condition for taking out an annuity is sufficient pension savings. That is, by the time of retirement, in this case at 55, a certain amount must be accumulated. For example, at the State Annuity Company the threshold amount of savings for purchasing a pension annuity contract this year is 9.5 million tenge for men and 13 million tenge for women. In addition, since an annuity is a long-term product – we invest money in order to receive a pension for life, which is at least 20 years or more – the funds we pay are invested by the insurer in securities. In addition to the monthly portion of the amount we paid in, we regularly receive investment income earned by our money in the account. According to experts, on average this amounts to 4.6–5.5% per year.

Uno momentо

To conclude a pension annuity contract, you need to fill in an application to the insurance company. A statement from the APF is attached to it. The fund sends these papers to the insurance company for the calculation. If the savings are sufficient and the person is satisfied with the calculation of future annuity payments, the contract is signed in three copies. One stays with the company, the second with the client, and the third with the APF. A contract with an insurance company for the purchase of a pension annuity can be concluded only from the age of 55. But this can be done only if the pension savings are sufficient. The pension fund must transfer the money to the insurance company, and from the following month the client starts receiving payments from the LIC. Thus, you need to submit an application to the insurance company together with copies of your identity card, taxpayer registration number (RNN) and a statement from the accumulative pension fund.

The other side of the coin

But for all these advantages of a pension annuity, there are also certain risks. In particular, if the insurance company undertakes to pay the pension for life, the recipient loses the right to pass it on by inheritance, which is provided for with payments from the APF. True, insurance companies offer various options, for example receiving the pension not for life but for a guaranteed period. For instance, the contract is concluded for 15 years, but if an insured event happens to the recipient, the heirs they have named continue to receive the pension. In any case, as pension savings grow, the choice between buying a pension annuity and receiving money from the APF will become increasingly pressing. After all, if a person comes to an insurance company today with the minimum permissible amount of pension savings, the pension paid to them monthly will also be small. And one more thing. Contributors who have concluded a pension annuity contract are free to choose the insurance company. But remember: if something about the company's work does not suit you, by law you can change it only two years after concluding the contract. Therefore, you should approach the choice of insurer seriously. And under the same legislation it is impossible to return from an insurance company back to an accumulative pension fund. A man aged 63 has pension savings of 12 million tenge. Receiving a pension from the pension fund, he can count on 600,000 tenge per year. 12 million tenge will last him 20 years. At 83 our hero will lose this source of income. The pensioner can increase his annual amount, but this automatically shortens the period of pension payments. For example, receiving 1,200,000 tenge per year will last him 10 years, meaning that by the age of 73 his pension money will run out. Now another scenario. If he takes out a pension annuity, he will be able to receive 600,000 tenge per year for life plus investment income. Another feature of receiving a pension from an insurance company is that the pensioner can set the frequency of payments himself, that is, decide how it is more convenient for him to receive the pension – monthly, quarterly or annually.

Key provisions:

- You can conclude a pension annuity contract under which you transfer your savings from the pension fund to a life insurance company and start receiving payments.
- Pension annuity contracts are concluded by persons who have reached the age of 55 and by military personnel retired for long service. Military personnel may transfer 50% of their savings and conclude an annuity contract for the period until they reach retirement age; in other cases a lifelong pension annuity is concluded.
- A lifelong annuity means that payments are made for as long as the recipient is alive. Payments do not stop when a certain age is reached, and do not stop if the total payments exceed the amount of transferred savings, i.e. they are made for life.
- The amount of the pension annuity payment under lifelong annuities as of the date of concluding the annuity contract may not be lower than the minimum pension. Payments are made in equal instalments at a set frequency, for example monthly.
- Under pension annuity contracts, the insurance premium less the payments actually made is returned to the heirs.


- To conclude a pension annuity contract, you submit an application to conclude the contract and sign the pension annuity contract.
Within ten calendar days, you notify the accumulative pension fund by submitting one original copy of the pension annuity contract.
Within thirty calendar days after receiving your notification, the accumulative pension fund transfers the amount of savings to the life insurance company in a single lump sum and in full, after which payments begin immediately.


For any additional questions regarding life insurance, you can contact the company's offices.