Pensions to be voluntary in Russia?

Pensions to be voluntary in Russia?

Chairperson of the Russian Central Bank Elvira Nabiullina described the introduction of the individual pension capital system as a priority of the Russian Central bank.

Nabiullina said that the share of institutional investors including pension funds and insurance companies is too low in Russia while economic growth is impossible without long-terms investment . 

The central bank plans to extend the list of permitted investment instruments for private pension funds and to eliminate barriers for public-private partnerships.

The new system was developed by the Ministry of Finance and the Central Bank, its main provisions were presented in 2016. 

According to the new concept, working citizens will sent retirement investments from their salaries to non-state pension funds. The amount of investments will gradually increase - from 0% in the first year and up to 6% in five years, that is, by 1 percentage point per year. These savings will be the property of the person, not the state.

The Deputy Director of the Institute for Social Analysis and Forecasting at the Russian Presidential Academy of National Economics and Public Administration, Yuri Gorlin, speaking with Vestnik Kavkaza, noted that the individual pension capital system prospects raise serious questions related primarily to low salaries of Russians. "It is doubtful that a large number of people will want to participate in this system, giving 6% of their salaries to non-state pension funds, if it is really voluntary. Even according to official statistics, salary of 60-70% Russians is lower than the average of about 40 thousand rubles," he said.

"The profitability provided by non-state pension funds up to now, if we take the entire long period since 2005, remained below inflation and even such conservative instruments as bank deposits in reliable Russian banks. Therefore, for Russians who have the ability to accumulate funds in the long-term (within 10% of the population), the option of sending a significant part of the salary to non-state pension funds for many years is simply not competitive compared to others," Yuri Gorlin concluded.