Have a look and get horrified: State services showed Russians the size of their future pension

Yekaterina Maksimova

“I have 15.4 thousand rubles”, “I was charged 16.7 with an experience of more than 20 years, what should I do?”. Such a flash mob began in personal and work chats of instant messengers after a mass mailing. Experts believe that the “letters of happiness” from the State Services portal are really a good reason to think about the future now.

Doctor of Economic Sciences, Professor Alexander Safonov, as an opponent of the funded pension system introduced in 2002 (and already frozen since 2014), recalled that the pension reform that began in Russia 20 years ago, in general, led to a violation of the principle of solidarity between generations.

And if before that pension contributions were 28%, then with the reform they dropped to 22%. “But in fact, the average pension rate, namely the average one, is 18%, because part of the money is spent on bringing pensions to the subsistence minimum for those who have it below the minimum wage,” Safonov explained and added that the withdrawal of the funded pension from the insurance “it was a huge folly".

Doctor of Economics, Professor of the Department of State and Municipal Finance of the Russian University of Economics. Plekhanova Yulia Finogenova notes that after the reform and leapfrog with the funded part, the average pension in Russia is equivalent to no more than 30% of the average wage in the country.

“But if we take the median salary and the average pension of a non-working pensioner, then this will be more than 40%, that is, the very minimum replacement rate recommended by the Convention of the International Labor Organization”, - Yulia Finogenova specified.

If nothing is done, then in ten years, having gone on a well-deserved rest, citizens will be able to count on indexed, but the same 40% of the median salary.

And now, Yulia Finogenova recalled, the average old-age pension for non-working pensioners in most regions of the Russian Federation is 13-16 thousand rubles and about 22 thousand rubles in Moscow, taking into account city allowances. At the same time, official statistics say: the average old-age pension in Russia after indexation on June 1, 2022 is 20,882 rubles.

“Modest pensions are explained by the fact that, firstly, wages are generally low in Russia and, secondly, there are restrictions within the pension calculation formula itself, and the indexation of the fixed part of the pension and pension points lags behind the growth of wages in the economy. This is how small insurance pensions are obtained. Moreover, for working pensioners, they are even less, since they have not been indexed since 2016. In fact, the size of the insurance pension in the pay-as-you-go pension system largely depends on how much money is deducted from the wage fund by those currently working. Therefore, the level of financing of the pension system depends very much on the current state of the economy”, - Yulia Finogenova added.

Yelena Kiselyova, an analyst at the Institute for Comprehensive Strategic Studies, notes that the suspension of contributions to the funded part of the pension, as well as the increase in the retirement age, was due to the fact that the burden on the Pension Fund has slightly decreased.

“However, the income of the Pension Fund is still not enough. According to data for 2020, incoming insurance premiums covered only 73% of the amount of insurance pension payments, and the remaining funds were transferred from the federal budget. In the future, the deficit of the pension system will only worsen as the population ages (the proportion of older ages increases, and the burden on the able-bodied grows). At the same time, it is also undesirable to increase contributions, as this slows down economic activity and contributes to the spread of shadow forms of wages”, - Kiselyova explained.

The pension fund won't help.

Alexander Safonov reminded future pensioners, excited by the distribution of State Services, that the preventive calculation is based on the fact that the incomplete work experience of the employee has not yet been taken into account.

“Therefore, the first piece of advice: to keep the length of service in white employment to the maximum extent, to remain in formalized labor relations. Secondly, the amount of wages will also be affected, therefore, as far as possible, wages "in envelopes" should be avoided. The third is independent savings and investments. Those who cannot afford it will have to rely solely on the pension accumulation insurance system, that is, receive a state old-age pension”, - the expert noted.

Elena Kiselyova agrees with Safonov: “Due to the fact that the well-being of pensioners has practically not been growing for the last 10 years, and the prospects for receiving a decent pension in the future are vague, the question of pension savings as an additional source of future pension, in addition to mandatory payments from the state, again arises”.

However, according to an analyst at the Institute for Comprehensive Strategic Studies, the opportunities for Russians are limited by falling real incomes and the lack of savings among half of the population (47% do not have savings, according to a recent Superjob poll).

The ex-president of the National Association of Non-State Pension Funds, Konstantin Ugryumov, also believes that it is necessary to look for additional sources of future income for old age now. And there are many pension products on the market. At the same time, he absolutely agrees with Elena Kiselyova - investment instruments are not available to everyone.

“There are many tools. These are accumulative bank deposits, and deposits in non-state pension funds, and accumulative insurance. Experience shows that one should set aside 10% of one's wages for old age. Only now let's figure it out: do people have the opportunity to do this? No. With such low salaries, what kind of savings can we talk about. And if in Russia, according to various estimates, 5-6 million people live below the poverty line, then what can we advise them? The only question is wages. If there is a decent salary, then you can and should provide yourself with a decent pension,” Konstantin Ugryumov believes.

According to Yulia Finogenova, those who can rely only on the state insurance pension are in the absolute majority. Since, according to sociological surveys, only about a third of Russian citizens form savings.

Frozen or missing?

The experiment with a funded pension, when the employer paid 6% for an employee (for citizens born in 1967 and younger), did not last long. A few years ago, the funded part of the pension was frozen. This means that 6% of deductions from wages are directed to the insurance part for the payment of current pensions, and are not deposited on the individual savings accounts of future pensioners.

During the short period that the pension innovation was in effect, Russians accumulated about 2.5 trillion rubles. Soon these amounts will be given to the owners. But it will not be privatization in the literal sense of the word.

NI reported that before the end of this year, the Ministry of Finance plans to submit a bill on reforming the funded pension, which the department has been preparing for several years. The system of individual investment accounts will become the main tool for stimulating savings for citizens of the country. The frozen trillions will be transferred to these accounts.

The law has not yet been adopted, but the Russians will obviously have to be included in the process of issuing investment accounts. Otherwise, experts predict, the money of silent people will simply go into the PFR distribution system.

Yelena Kiselyova notes that with the many existing individual and corporate pension programs for voluntary pension savings (in non-state pension funds or other organizations), only 6.2 million people now have voluntary pensions. Whereas more than 70 million Russians can be potential participants in the system of pension savings.

“The return of frozen pension savings is needed so that there is some kind of basis for further pension savings, in order to involve more people in this process”, - Kiselyova concluded.

Alexander Safronov recalls that investment management of pension savings is a risky system. And future retirees will have to take very, very seriously to protect and increase their savings for old age.