The word “annuity” scares many people, but the idea behind it is simple: you hand a certain amount to an insurer, and it undertakes to pay you an income regularly. A pension annuity is an insurance contract under which such payments are made for life or for a set period.
How it works
In Kazakhstan, citizens’ pension savings are held in the unified accumulative pension fund. If the conditions set by law are met, these savings can be transferred to an insurer to conclude a pension annuity contract. The insurer then takes on the obligation to pay the pension regularly — no matter how many years the recipient lives.
There are also voluntary annuity programmes: a person builds capital on their own, for example under a savings policy, and then uses it to buy an annuity.
The main advantage: lifetime income
Payments made directly by the pension fund continue as long as there is money in the account. An annuity works differently: the insurer spreads the longevity risk across many clients. So a person keeps receiving payments even if they live longer than the calculations assumed. For many, this is the key argument — the certainty that the income will not stop.
Types of annuities
- Lifetime — payments until the end of the recipient’s life.
- With a guaranteed period — if the recipient dies during the guaranteed period, the remaining payments go to heirs or beneficiaries.
- Fixed-term — payments for a predetermined number of years.
- Indexed — the payment amount is increased periodically to partly offset inflation.
What affects the payment amount
- The amount you hand over to the insurer.
- Your age when the contract is concluded: the older you are, the larger the regular payment for the same amount.
- The type of annuity chosen: a guaranteed period and indexation reduce the starting payment.
- The terms of the particular insurer.
How the process works
First, get quotes from several insurers: for the same amount, payments may differ. Then choose the type of annuity, appoint beneficiaries for the guaranteed period if needed and submit the documents. If pension savings are used, the money is transferred from the pension fund to the insurer in the established manner, after which payments begin.
Who should consider an annuity
An annuity suits those who want a stable lifetime income and do not want to manage their savings themselves. However, once payments have started, the contract usually cannot be terminated at the recipient’s request, so it is important to make a considered decision and compare offers from several insurers.
A Dynasty consultant will explain the terms of different insurers, help you compare payment amounts and choose a suitable pension annuity option.