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Russia Retains Funded Pensions

23.04.2015 12:00 / TASS

Funded pensions will not be abolished in Russia, Prime Minister Dmitry Medvedev told the Government today. He said that the decision is supported by most experts and citizens. “We must develop a predictable pension system, make it better and more optimized”, pointed out the Prime Minister.

Medvedev commissioned proposals from Minfin and the Ministry for Economic Development on balancing the budget with funded pensions in mind. He also commissioned a plan for the effective use of funded pension money. “It implies not merely covering budget deficit with this money, but promoting investment and economic development, especially now, when we have no access to foreign financial liquidity markets”, explained Medvedev.

The fate of funded pensions, introduced in 2002, has been a matter of Government debate. A decision was passed earlier to freeze the 2014 and 2015 savings. The Russian Government was due to pass the final decision on funded pensions by the time of drawing the 2016 budget.

The Ministry for Economic Development liaised with Minfin to retain funded pensions as part of the mandatory pension system. Finance and Economy ministers consider funded pensions a crucial investment source for the economy, particularly when access to foreign financial markets has been restricted. They insist on continuing with non-state pension funds (NPFs). On the other hand, the social security bloc led by Deputy Prime Minister Olga Golodets, has been consistently promoting the switch to a fully unfunded pension scheme. The social security bloc cite the inability of NPF asset management companies to provide sufficient yield on savings, while the unfunded system annually adjusts pension payouts against inflation.

Non-state Pension Funds industry reformProject Group №1