State educational savings system
STATE EDUCATIONAL SAVINGS SYSTEM

State educational financial savings: new word in accessibility of education

State educational financial savings – is new alternative way of state support of getting out-of-pocket vocational and higher education, proving possibility to everyone to accumulate funds on deposits in the banks of the second level for payment for education of your children or relatives in higher education establishments and colleges of Kazakhstan and abroad in the future, starting from the birth.
Implementation of a system of savings for educational purposes does not mean the cancelation of grand(scholarship). The possibility to get higher and vocational education for free by the mean of holding grand, that is distributed on the basis of the results of UNT, and also in some other higher educational establishments – on the competition basis, remains.
New system is offered as additional form of support of getting out-of-pocket education. Everyone can decide by her\his own about the choice in favor of particular method of financial support for education - accumulation of funds, educational loan formalization or payment by their own funds.

Basic provisions – State educational savings system

State educational savings system:

new word in accessibility of education

The President of the Republic of Kazakhstan in his annual message to the people of Kazakhstan “build future together!” dated January 28, 2011, pointed out that the new possibilities have to appear for accumulation of funds for studying with getting percentage bonuses from country, and gave task to the Government to develop saving system for levels of technical and higher education in analogue with that one, realized by ZhilstroiSberBank in mortgage construction.

The main idea of State educational savings system is as follows:

Everyone can systemically accumulate funds on deposits in banks of the second level for payment for education of their children or their relatives in vocational education establishments of country in the future, staring from the birth.

Country, from its side, will accrue state award on educational funds of citizens.

In addition, if there are insufficient funds accumulated for education, depositors will have the opportunity to get education loan for the remaining amount on certain simplified conditions.

The main provisions of the project of State educational savings system:

1. Purpose, objectives and main principals of State educational savings system

The purpose of State educational savings system is to provide affordable for citizens of Kazakhstan instrument of accumulation and financing of educational services in higher education establishments and OTPO.

The objectives of SESS are following:

· improvement of accessibility of vocational, postsecondary and higher education for citizens;

· expansion to parents and students ways to pay for education;

· expansion of types of state instrument of financing of technical and vocational, postsecondary and higher education;

· increasing of financial literacy of citizens and the culture of savings.

Mechanisms of State educational savings is based on the following principals:

· the safety of savings of citizens of the RK;

· ensuring proper use of savings of citizens of the RK;

· encouragement savings of citizens of the RK from the state.

2. Participants of SESS

1) depositor, investor, additional - debtor;

2) operator (JSC “Financial center”);

3) bank of the second level (bank-participants), additionally – creditor;

4) education organization (higher education establishments, organizations of technical and vocational education);

5) authorized body in the field of education;

6) authorized body in the field of finance.

Model of state educational savings system - МОДЕЛЬ ГОС.ОБР.НАКОП.СИСТЕМЫ

Правительство РК в лице МЗ РК\МФ РК – government of RK, presented by MOH of RK/MF of RK

Премия от государстваState premium

АО «Финансовый центр» - JSC “Financial center”

Банки второго уровня – second-tier bank

Вкладчик\носитель – depositor

Вузы\ОТПО – higher education establishments\organizations of technical and vocational education

Вклады – deposits

Процентное вознаграждение и премия от государства - Percentage fee and the premium from the country

Оплата за обучение – payment for education

3. Cooperation between an operator and a bank of the second level

Operator and bank of the second level conclude agreement on cooperation in SESS, in which the conditions and the order of cooperation are approved.

4. Agreement on educational accumulative deposit

Nay physical person of majority age – resident or non-resident of the Republic of Kazakhstan – can conclude agreement on educational accumulative deposit, which says about regular payment within certain period of time, the size of which is determined by a depositor independently, with bank-participant of SESS. On behalf of or in favor of one minor contributor may be entered into only one agreement on educational savings deposit.

Educational saving deposit can be opened by depositor for any under-age child not depending on the status of relationship. Additions to deposit can be made by depositor, and by the third persons.

Minimal term of savings for education – 1 year, maximal term - 20 years.

Deposit can be opened only in national currency – KZT. Primary onetime payment for opening the deposit – 4 minimum calculation index for Almaty, Astana, 3 minimum calculation index – for regional centers, 2 minimum calculation index – for district centers.

Educational saving deposit is the object of compulsory guaranteeing of deposits of physical persons.

5. Fee of participating bank

On the deposit the bank charges a monthly fee by market rate, which is attached to the principal amount of the deposit (capitalized).

6. Measures of State support for SESS

The following measures of support of state educational saving systems.

6.1. In the period of saving funds the country annually encourage depositor in the form of charge of from the national budget in the amount of state premium of 5% per annum on the deposit amount for the fiscal year but not more than 50 MCI.

The size of state premium is 7% per annum, but no more than 50 MCI, by deposits, opened in favor:

· children with disabilities;

· Children from large families;

· children-orphans and children without care of parents;

· children, living in rural area.

Calculation of state premium rate is calculated so that the total amount of “fee of bank plus state premium” was in the structure of all amount of savings from 20% to 50 % depending on the time of savings.

Банки второго уровня – second-tier bank

Республиканский бюджет – republican budget

Премия государства - State premium

Вклады – deposits

Вносители (родители, вкладчики, третьи лица) – depositors (parents, depositors, third persons)

Начисление вознаграждения в размере 5 % годовых – charge of fee of 5% per annum

It is planned that in case of giving educational grand to depositor, the funds of educational savings with charged state premium can be directed on the following purposes:

1)educational accumulative deposit, opened (opening) in the favor of any third person (transferring the current account);

2) payment of educational service for the getting other levels of education, including postgraduate education in the Republic of Kazakhstan;

3) deposit for housing construction savings.

State premium will not be charged in case of:

1)four time in succession violation of the periodicity of replenishment of the deposit with monthly periodicity within conditional year;

2) two times violation in succession of the periodicity of replenishment of the deposit with quarterly frequency;

3) single violation in succession of the periodicity of replenishment of the deposit with semi-annual frequency.

The return of state premium in republican budget can be provided in the following cases:

1) early termination of agreement on education accumulative deposit by initiative of depositor;

2) dismissal of depositor from the education organization because of the reason of poor progress.

The size of state premium can be reconsidered every 5 years by authorized bodies in the field of education and finances.

6.2. During period of savings and payment of educational credit the country provides tax rebates to depositor as:

· exception of the State premium of the types of income, taxable individual income tax;

· allocation of amounts allocated by the taxpayer to pay off the interest on educational loan received by SESS to tax deductions in determining income taxed at source.

7. Payment of educational services

The following mechanism of payment of educational service is provided:

1) depositor provides to participating bank a copy of agreement of providing educational services;

2) depositor selects periodicity of payment: in tranches (for each semester or each academic year) or nonrecurrent (total costs of education);

3) participating bank on the basis of given documents charges on the account of education organization funds from deposit.

8. Cooperation between operator and education organization

Operator:

1) provides monitoring of compliance of purpose-made educational accumulative deposit and educational credit;

2) prepares and sends reference – statement about amount of state premium, that should be returned to the republican budget, to education organization or participating bank;

3) transfer funds, that are on the account of operator from education organization or participating bank in return of the amount of premium of state, in the republican budget.

Education organization:

1) at the request of participating bank, creditor or operator shall notify them about the admission, expulsion, transfer, including in connection with the release of the contributor, by sending copies of relevant documents;

2) at the request of the depositor (borrower) or the participating bank (lender) provides information on tuition fees for the required period or a full academic tuition fees at the date of issuance of the certificate;

3) at the request of the operator provides the necessary information about the student-investor;

4) in case of dismissing of a student-investor, he\she returns through the operator of the amount of the state premiums in the national budget according to reference-statement.

9. Educational crediting in the frames of State Educational savings system

In case if there are not enough accumulated funds for the total payment for education, depositor has right to get educational credit in the frames of SESS.

Educational credit:

1) is given in the size of accumulated amount no less than 25 % from amount, necessary for payment for education in the full volume;

2) is given under 100% guarantee of operator;

3) is opened by forming credit line by the creditor for remained amount with possibility of its correction on the amount if increasing the cost for education in education organization.

The debtor in the frames of State educational saving system is not the subject of requirements of appropriate level of progress and other, except guarantees of operator, ensuring the educational grand.

10. Social and economical effect from implementation of SESS

For country in general:

Creation of special financial instrument of social orientation, demanded by society under the conditions of market economy,

Enlargement for country of lines of instruments for support of population in payments for educational services,

reallocation of state financial resources in the vocational education system in favor of the most vulnerable population stratum,

mobilization of financial resources of population

for citizens separately:

increasing of accessibility for population of higher, technical and vocational education,

increasing of financial literacy of citizens and culture of savings.

Action plan for 2011 for developing and implementation of State educational savings system

Action

duration guideline of completion

Responsible for realization

 

The development of mechanism of State educational savings system (further - SESS):

· conduction of sociological research, population survey;

· discussion about main provisions of SESS with banks of the second level and higher education establishments;

· development of mechanism of SESS

April 2011 year

Ministry of Education and Science, JSC “Financial center”




Conduction of actuarial calculations, calculation of social and economic effect from SESS, risk assessment

July 2011

Ministry of Education and Science, JSC “Financial center”



Discussion in regions together with local executive bodies of question of realization of SESS

July 2011

Ministry of Education and Science, JSC “Financial center”

 

Development of concept of law in draft in the questions of SESS and submission to inter-departmental commission of legislative drafting activities in the Government of the Republic of Kazakhstan (further IDC), supposed corrective actions and amendments in:

· Internal revenue code;

· the Law of the Republic of Kazakhstan «about education»;

· the Law of the Republic of Kazakhstan «About compulsory of guaranteeing of deposits, provided in the banks of the second level of the Republic of Kazakhstan»;

·the Law of the Republic of Kazakhstan «about banks and banking».

October 2011 year

Ministry of Education and Science, JSC “Financial center”



Developing and agreement of law in draft in the issues of SESS with interested state bodies

October

2011 year

Ministry of Education and Science of RK, JSC “Financial center”



Submission of law in draft in the issues of SESS in the Government of the Republic of Kazakhstan  

November

2011 year

Ministry of Education and Science of RK, JSC “Financial center”

 

Government of RK, Ministry of Education and Science of RK, JSC “Financial center”

 

Developing, agreement and approval of normative legal by-law in issues of SESS:

· Agreement with JSC “Financial center” and second-tier bank;

· Standard contract between second-tier bank and depositor about educational savings deposit;

· the Rules of functioning of SESS

December  2011

Government of RK , interested state state bodies, JSC “Financial center”

 

Current survey of the project “State educational savings system”

March 2010. Developed and submitted for consideration in the Government of the Republic of Kazakhstan the Concept of creation of State educational savings system.

April- June 2010. Taking into consideration of the Concept of creation of State educational savings system by interested state bodies and organizations: Ministry of Finances of the Republic of Kazakhstan, Ministry of economic development and trade of the Republic of Kazakhstan, National Bank of the Republic of Kazakhstan, Agency of the Republic of Kazakhstan for regulating and survey of financial market and financial organizations, FNB “Samruk-Kazyna”.

December 2010. The state program of the development of education of the Republic of Kazakhstan for 2011 – 2020 was approved by the Decree of the President of the Republic of Kazakhstan dated 07.12.2010 № 1118. The developing of the mechanism of State educational savings system is included in the given Program.

The President of the Republic of Kazakhstan in his annual message to the people of Kazakhstan “build future together!” dated January 28, 2011, pointed out that the new possibilities have to appear for accumulation of funds for studying with getting percentage bonuses from country, and gave task to the Government to develop saving system for levels of technical and higher education in analogue with that one, realized by ZhilstroiSberBank in mortgage construction.

From the end of January 2011 the works are made for the developing of mechanism of functioning of State educational savings system, including sociological analytical research in the questions of State educational savings system and existing system of educational crediting:

· studying of opinions of pupils (including school-leavers), parents, students of towns and rural area;

· survey of representatives of 12 leading higher educational establishments of Kazakhstan: KazNU named after Al-Farabi, ENU named after Gumilev L., KarSU named after Buketov E.A., KazNTU named after Satpayev K., KazNMU named after Asfendiarove S., KazNVU named afrer Abay, KIMEP, KarSU, MAB, MOC (KazSACA), Nazarbayev University.

Within given works by the condition of the 31st of March 2011:

1) the survey of pupils (including school-leavers), parents, students is conducted;

2) on the 4th of February 2011 in Almaty and on the 10th of February in Astana there were meeting of representatives of the Ministry of Education and Science of the Republic of Kazakhstan, 11 major higher education establishments of Kazakhstan, 10 major banks of the second level, Kazakhstan fund of guaranteeing of deposits, Associations of financiers of Kazakhstan.

The results of meeting showed interest of higher education establishments and banks in the implementation of State educational savings system in Kazakhstan.

3) the proposals for the mechanism of functioning of State educational savings system, together with Ministry of Finances of the Republic of Kazakhstan, Ministry of Justice of the Republic of Kazakhstan, Agency of the Republic of Kazakhstan and survey of the financial market and financial organizations and submitted to the Government of the Republic of Kazakhstan.

In the March 2011 the works for the conduction of actuarial calculations and building of financial and economical model of State educational savings system were began. The results of given works will be the calculations of social and economical effect from State educational savings system in long term perspective for country.

In addition, the work of drafts of normative legal acts in the questions of functioning of State educational savings system.

The planned period of starting of State educational savings system – is 2012 year.