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Minfin Attempts to Save Funded Pension System

10.09.2014 12:06 / vedomosti.ru

Minfin is making an attempt to save the funded pension system, which will be liquidated according to Deputy Prime Minister for Social Security Olga Golodets. The ministry has acquiesced to the withdrawal of over RUB 1 trillion worth of savings for 2014-2015, and is trying to keep the rest. Minfin has drafted a bill (posted on regulation.gov.ru), that limits withdrawals of pension savings to 2014-2015. Going forward, it is business as usual for the funded pension system, states the bill.

“The bill must incorporate changes in the funded system, as announced by the Government in August”, explains Deputy Finance Minister Alexey Moiseev: the bill reflects the repeated withdrawal of pension savings, but from 2015 onwards, “the funded system remains part of the mandatory pension plan”.

The Minfin draft slates the transfer of ‘due’ amounts to private funds for as early as the next year. The amounts make up some RUB 500bn: the remainder of funded pension deposits for 2H 2013, as well as the money of ‘undecided’ individuals, raised by funds before all the moratoriums, says Moiseev.

The Government froze these funds in late 2013, with a promise to hand the money to funds as soon as they have joined the guarantee system. Most NPFs, accounting for over 80% savings are in the process of finalizing their association with the guarantee system — the Central Bank has already started auditing these NPFs.

Moiseev says the bill has been commissioned by the Government and has not been approved yet, however, it is due to be passed this year.

The social security block does not object to handing the remainder of the 2013 deposits to the NPFs — this was part of the original plan, said a Golodets representative, and yet limiting the withdrawal of savings to 2014-2015 as well as abolishing the entire funded system is “subject to further debate”.

This is the first official document to appear — in the past, the people and the business had no clues to follow except contradictory statements made by officials. The decision to withdraw funded pensions in 2015 for a second time was announced a month ago and surprised some ministers as well as the market.

On 5 August, Labor Minister Maxin Topilin said this ‘government decision’ exists, despite fierce objections from the finance and economy ministers and the Central Bank. A few days later Golodets claimed that the best way to proceed is via abolishing savings in state insurance altogether and transferring to voluntary savings programs. Golodets promised in late August that the decision to liquidate funded pensions could be passed by the Government in September.

The future of savings in private funds was suspended — RUB 1.1 trillion, deposited by people in non-state pension funds over 10 years. To avoid withdrawal of this amount for the state budget, Minfin proposed to market participants that the sum be assigned a new status and de facto privatized.

Natalia Biyanova, Philipp Sterkin

Non-state Pension Funds industry reformProject Group №1