• The modern pension system in Russia consists of three components: state pension provision, non-state pension provision and compulsory pension insurance.

Who is entitled to state pension benefits?

• Certain categories of citizens of the Russian Federation have the right to receive this pension, for example, civil servants, military personnel, astronauts, participants in the Great Patriotic War and victims of radiation and man-made disasters.
• The source of pension payment is the federal budget.

How is non-state pension provision formed?

• Non-state pension provision is an individual voluntary formation of a pension.
• This type of pension is paid only by non-state pension funds (NPFs) and is formed from voluntary contributions from individuals under individual pension plans or from voluntary contributions from employers to employees under corporate pension programs.

What is compulsory pension insurance?

• Compulsory pension insurance involves the payment of insurance pensions through mandatory insurance contributions from employers, which amount to 22% of the employee’s annual earnings.
• Depending on the age category, a pensioner can receive insurance and funded pensions.
• At the choice of a citizen, either all 22% of the salary can be used to form the insurance part of the pension, or 16% - to the insurance pension, 6% - to form the funded part.

What is an insurance pension and how is it calculated?

• The insurance pension is taken into account as a future liability to the insured persons and is used to pay current pensioners.
• The formation of an insurance pension is carried out in pension points, the number of which will depend on length of service, salary and retirement age.
• To qualify for an old-age insurance pension, you must have 30 or more pension points, but this norm will come into full force in 2025.

What is a funded pension?

• A funded pension is understood as a sum of money formed from employer contributions and profits from their investment. Pension savings are transferred to the citizen’s account and paid every month after retirement.
• The main difference between a funded pension and an insurance pension is the possibility of investment - if the insurance pension is managed exclusively by the Pension Fund of Russia (PFR), then the funded share can be transferred to other management companies.

Who is entitled to a funded pension?

• Savings capital is accumulated through a portion of insurance contributions (6% of wages) only for Russians born in 1967 or later who are officially employed.
• By the end of 2015, such citizens had to decide whether they wanted to form a funded part from their insurance premiums or all funds should go only to the insurance model.
• Those born in 1966 and earlier were not given the opportunity to choose a pension with a funded component. All their payments - 22% of the salary - go to the Pension Fund.

Who are the “silent people”?

• According to the definition enshrined in legislation, “silent people” are citizens who have not taken advantage of the right to choose a state or private management company to manage their pension savings, the functions of which are performed by the state corporation Vnesheconombank or a non-state pension fund (NPF).
• The funds of the “silent people” are by default invested as part of the expanded investment portfolio of the state management company.
• In 2016, the government did not extend the transition period for transferring funded pensions to another management company or non-state pension fund. Now the “silent people” will form only an insurance pension. All contributions that the employer pays for them will go to the Pension Fund.

What is happening to pension savings now?

• Since 2014, the transfer of citizens' funds to funded pensions has been frozen. All the money went to the formation of citizens' insurance pensions. According to the authorities, the decision to freeze was made due to the need to balance the pension system and guarantee stable payments to all pensioners.
• The freeze affected both the funds of the “silent ones” and the clients of the NPF. Subsequently, the moratorium extended to 2015 and 2016.
• All previously generated pension savings are still invested in the selected NPF and will be paid to the citizen in full, taking into account investment income, when he receives the right to retire and applies for it.
• After unfreezing, savings contributions will again begin to flow into the personal accounts of the owners.

What changes are offered with the funded pension?

• At the moment, the fate of the funded pension has not been completely decided. In May 2016, Russian Finance Minister Anton Siluanov said that a new system for the formation of pension savings will be launched in Russia by 2018, which will be based on the principles of voluntariness, when citizens will have to take care of the amount of their future pension themselves.
• Future retirees will be able to open savings accounts in pension funds or commercial banks.
• According to various estimates, the voluntary funded pension system will reduce the budget transfer of the Pension Fund (the funds that the Pension Fund receives from the budget for the payment of current pensions) by 300-400 billion rubles. annually.

Why is something constantly changing in the pension system?

• According to experts, the pension reform is dictated by the need to find the most budget-balanced version of pension provision, which will allow, while ensuring decent savings for citizens in old age, not to increase the budget deficit and provide the economy with the necessary “long-term” money.

Pension system of modern Russia

The Russian pension system is a set of legal, economic and organizational institutions and norms created in the Russian Federation with the goal of providing citizens with material security in the form of a pension. In its modern form, it was introduced on January 1, 2015 and includes relations on the formation, assignment and payment of the following types of pensions: insurance pension, state pension, funded pension. In 2015, 43 million Russian citizens received state pensions. A significant portion of pensioners earn below the pensioner’s subsistence level.

In the modern world, the state is the guarantor of the stability of the socio-economic status of citizens; one of the main criteria for the stability of the socio-economic status of citizens is the effectiveness of the pension model.

The pension system in Russia has been undergoing changes for many years. The goal of the reform is to achieve a socially acceptable level of pension provision for citizens. At the moment, the country has once again adopted a new model of the pension system, the main distinguishing feature of which is providing citizens with the opportunity to choose a pension model to receive a pension upon reaching retirement age - with a full deduction of contributions in the amount of 22% to the insurance part of the pension or its division for insurance (16%) and savings (6%), the savings part can be invested in various non-state pension funds (NPFs) and other investment organizations.

In accordance with the new pension legislation, if citizens who have not previously submitted an application to choose a management company wish that in subsequent years, insurance contributions in the amount of 6% of the individual tariff continue to be used to form the funded part of their labor pension, they should do so by 31 December 2015 submit an application to select a Management Company (MC) or NPF. At the same time, as before, when transferring pension savings to a non-state pension fund, a citizen must conclude an appropriate agreement on compulsory pension insurance with the selected NPF.

The above means that the investor’s choice for the funded part of the pension (6% tariff) is associated with the choice of a management company or a non-state pension fund. For those who do not submit an application before December 31, 2015, pension savings will no longer be formed through the receipt of new insurance contributions from the employer, and all insurance contributions will be sent to form the insurance part of the pension to the Pension Fund of Russia (PFR).

Thus, the state will transfer the majority of citizens to an insurance pension model without a funded part, since most citizens do not seek to make their choice in favor of a management company or non-state pension fund.

It is obvious that the modern model of the Russian pension system is imperfect and has certain disadvantages:

1. Simplicity and transparency are not characteristic of the new pension formula. On the one hand, the proposed point-based pension system is very complex and opaque for the population to understand. On the other hand, for most workers, the procedure for determining the maximum amount of pension coefficients from 2015 to 2021 is complicated. All priorities in the new pension formula are shifted to wages 1.5–2.3 times higher than the average wage in the country. At the same time, the interests of regions and workers with wages below the average wage in the country are not taken into account. Indexation of the basic part of pension accumulation is guaranteed only in accordance with the level of inflation, and not indexation of the basic part of the basic part of pension accumulation in accordance with the increase in the cost of living.

2. Absolute balance of the pension system as a difference between income and expenses equal to zero cannot be achieved, since at the beginning of the year it is impossible to accurately predict the amount of receipts of pension contributions, the sum of the pension coefficients of all pensioners in the current year and, accordingly, determine the size of one pension coefficient .

3. In the new pension accumulation model, it is necessary to reserve funds that were not spent on paying pensions to employees who postponed the assignment of pensions at retirement age. With a significant number of workers who have postponed the assignment of pensions, as they retire, the amount of pension coefficients (new pension rights) will increase significantly. Without reserving funds, in a few years the growth of the value of the pension coefficient will slow down significantly, then additional federal budget expenditures will be required to ensure an increase in the value of the pension coefficient due to inflation.

It follows that the main innovation is the introduction of the so-called point system for calculating pensions, which in turn involves a transition to a system for calculating individual pension coefficients and, consequently, a transition to a new pension formula. In this form, the pension formula is completely opaque and leaves to the discretion of the state both the establishment of the specific size of the pension and the value of the indexation coefficients of the insurance and basic parts of the pension. In the circumstances created by the state, the opportunity to encourage citizens to retire later will be lost, since it is impossible to estimate in advance the exact size of the pension. In addition, there is the possibility of losing the amount of the pension if, at the time the employee reaches retirement age, the value of the pension coefficient will be significantly higher than that established several years later.

As a result, it should be concluded that the pension reform did not bring fundamental changes in favor of citizens, in addition, during the reform, one of its main goals was not achieved - stimulating citizens to continue working after reaching retirement age. This goal was not achieved due to the fact that the assessment system of pension savings was reduced to a point form, but in turn no steps were taken to index the main savings part in relation to the pensioner’s subsistence level; in this situation, a citizen may lose if they will decide to continue working after reaching retirement age. Consequently, we can conclude that this reform did not bring qualitative changes in the pension system and could not achieve the main goal - strengthening the position of pensioners.

The Russian pension system is a synthesis of the distribution mechanism of pension provision and elements of funded pension provision. Since 2002, the country has launched a pension reform mechanism, which is one of the components of the complex of economic reforms carried out in Russia. The pension reform is aimed at changing the existing distribution system for calculating pensions, supplementing it with a funded part and personalized accounting.

The Russian pension system in its modern form includes relations regarding the formation, assignment and payment of the following types of pensions: state pensions, labor pensions, non-state pensions.

State pension pension is a monthly state cash payment that is provided to citizens in order to compensate them for earnings (income) lost in connection with the termination of the federal state civil service upon reaching the length of service established by law upon retirement to an old-age (disability) pension. This pension is provided to government employees; military personnel; participants of the Great Patriotic War; citizens affected by radiation and man-made disasters; disabled citizens (disabled people).

In 2009, pension reform continued, aimed at improving the pension system. A number of laws have been adopted, according to which the unified social tax paid by employers, from January 1, 2010, is replaced by insurance contributions paid by employers directly to the Pension Fund of the Russian Federation.

Thus, in accordance with the federal law “On Labor Pensions in the Russian Federation,” the old-age labor pension from January 1, 2010 consists of two parts - insurance and funded.

Instead of the basic part of the labor pension, a fixed basic amount of the insurance part of the old-age labor pension has been introduced as an integral part of this part of the pension. The fixed basic amount of the insurance part of the labor pension corresponds to the previously existing size of the basic part of the labor pension, it’s just that now it is part of the insurance part of the labor pension.

The insurance and funded parts of the labor pension are formed from insurance contributions paid by the employer for each employee. The size of the insurance and funded parts of the labor pension depends on the earnings of the insured person and the duration of his work activity.

Contributions paid to the insurance part of the pension are conditionally funded; they are spent on paying pensions to today's pensioners, and the state's obligations to pay this part of the pension in the future accumulate in the accounts. Contributions to the funded part of the pension are not spent on payments, but are accumulated in individual personal (pension) accounts of citizens.

The funded part of the pension is the only part of the labor pension, the fate of which a citizen has the right to decide independently. Currently in Russia there is a two-level system for managing the funded part of a pension: a citizen can choose between the Pension Fund (PFR) and one of the non-state pension funds. Funds deposited into the savings system account are subject to investment, and the income received as a result of investment is also taken into account in the accounts of the insured persons, as well as insurance premiums. Investment of pension savings of persons remaining in the Pension Fund of Russia is carried out by private management companies selected based on the results of a competition held in accordance with the decision of the Government of the Russian Federation or the State Management Company. The state management company, the functions of which, by decision of the Government of the Russian Federation, is performed by Vnesheconombank, in accordance with the law, has the right to invest pension savings only in government securities and mortgage-backed securities, confirmed by state guarantees, which provides this placement option with the least risk, but also the lowest profitability.

Non-state pension funds, as well as private management companies, are legally allowed to invest pension savings in a wider range of instruments. This allows them to receive higher investment returns. The Russian state pension system is supplemented by voluntary pension provision. It implies the provision of pensions at the expense of employers, citizens, or at the expense of budgets of constituent entities of the Russian Federation and local budgets.

Both compulsory and voluntary pension provision can be provided both through a state institution - the Pension Fund of the Russian Federation, and through non-state pension funds. All funds have many options for savings schemes, both corporate and personal. In a corporate scheme, contributions are paid in full or in part by the employer; in an individual scheme, an individual voluntarily forms his own future pension.

All responsibility and control for the payment of pensions, according to the law “On Compulsory Pension Insurance,” rests with the state. The body exercising external control over the activities of non-state pension funds and the safety of pension savings, as well as the Pension Fund of the Russian Federation, a state management company, is the Federal Service for Financial Markets. The Ministry of Health and Social Development of the Russian Federation protects the interests of participants in the non-state pension fund, insured persons and their legal successors.

Thus, it can be noted that In most countries of the world, a pension system based on the principle of “solidarity of generations” still prevails, when pensions are paid from mandatory payments that are currently paid by working citizens. This system in the West is called “Pay as You Go” (PAYG), which can be translated as “payment as you go.” This is the so-called first pillar of the pension systems existing in different countries. However, this “first pillar” is becoming increasingly shaky. It is being undermined by the aging population of developed countries, as a result of which the ratio of the number of workers to the number of pensioners is decreasing. The growth of the average standard of living requires the establishment of increasingly “generous” pensions. This leads to an increase in the state’s obligations to pensioners, to a forced increase in mandatory pension contributions, to an increase in the cost of financing the PAYG pension system, which even in the most prosperous countries reaches 10% of GDP. The solution to the problem is the transition to more modern and efficient systems - the “second pillar” , based on contributions from enterprises and the possibility of investing these assets, as well as on voluntary pension savings of citizens - the so-called third pillar of the pension system.

Pension system of the Russian Federation

Pension system of the Russian Federation– a set of legal norms, public and private structures that provide periodic payments to citizens of funds upon reaching retirement age, as well as in the event of disability or loss of a breadwinner.

The labor part of the pension is regulated by Federal Law No. 173-FZ of December 17, 2001 “On Labor Pensions in the Russian Federation,” which stipulates, in particular, the right to early receipt of a pension for certain categories of citizens and other standards.

As a result of the pension reform of 2002, the following types of pensions were established in Russia.

Firstly, a labor pension: for old age, disability or loss of a breadwinner. It consists of two components - insurance and savings parts. The first is paid upon reaching a certain age. For men this is 60 years old, for women - 55. The insurance part is financed through mandatory contributions to the Pension Fund of the Russian Federation. In 2011, the payment for the main part of legal entities is 26% of the wage fund. At the same time, for workers born before 1966, the entire amount is transferred to the insurance part of the pension. For those born after 1966, deductions are divided in the following proportion: 20% - insurance, 6% - funded part. At the same time, the Pension Fund maintains a separate personal account for each employee, where payments are recorded.

The funded part of the pension can be accumulated in a state or non-state pension fund.

Secondly, a pension for long service, which is received by federal government employees, military personnel (except for those who served in conscription), astronauts, and test pilots. Such pension payments are regulated by separate laws.

Thirdly, the social pension is for those who are not entitled to a labor pension, for example, for unemployed people. According to the law, the social pension cannot be below the subsistence level.

Fourthly, non-state pension. Paid on the basis of an agreement concluded between the participant and the non-state pension fund. The amount of contributions and subsequent payments is specified in the agreement.

The pension system in force in the fall of 2011 is not final. The problem is that, on the one hand, it is necessary to increase payments, and on the other, to reduce the burden on the business, which must pay contributions from the payroll fund. Another pension reform is planned for 2014, although the final parameters of what will happen have not yet been determined.

See what the “Russian Pension System” is in other dictionaries:

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Today, a broad legislative framework, taking into account any possible nuances, determines such an important aspect of the life of every citizen of our country as the pension system of the Russian Federation. The reform that appeared in 2001 concerning pensions contributed to the adoption of the Federal Law on the need for pension insurance. Since 2002, the pension system has become what we know it today.

Structure of the pension system of the Russian Federation

The modern pension system of the Russian Federation is a set of laws whose task is to support and organize the regular transfer of funds for persons who have already retired.

The state pension system is divided into three main groups:

• State pension provision. The state organization responsible for paying pensions is the Pension Fund of the Russian Federation. Pensions from the state are transferred to citizens from the federal budget, distribution is carried out among narrow segments of the population.
• Mandatory pension insurance. These are payments from the Pension Fund or Non-State Pension Company. This is a labor pension provided to most working people. The accumulation of funds is carried out from mandatory insurance contributions, which are transferred by the employer to the Pension Fund.
• Non-state pension provision... This system is maintained by private Pension Funds and can be individual or corporate. Any person or organization that decides to enter into a separate agreement with a non-state pension fund and ensure a higher standard of living in retirement can receive such payments. Such a service is paid for by the pension contributions of an individual or a company that provides additional protection for the funds of its employees.

In these three groups, a number of specific features can be established, each individual provision works according to certain principles, capable of providing people with a variety of security options in retirement.

It is worth paying close attention to the structure of the system for calculating and issuing pensions in the Russian Federation.

Structure of the system for calculating and issuing pensions in the Russian Federation

pension insurance			pension provision		non-state pension provision
labor pensions			state pensions		additional pensions
varieties and causes
elderly age	loss of a family member responsible for income		elderly age; disability; loss of a breadwinner; length of service; social pension.		until the end of life; urgent
	disability
insurance; cumulative.	insurance
financing
from insurance contributions paid by the employer to the Pension Fund budget		from the federal budget		from voluntary contributions of the employee and employer
insurance organizations
Pension Fund or NPR (funding part only)		Pension Fund		Non-state Fund

How does the state pension system work?

The purpose of state pension provision is to accrue the basic part:

• labor pensions;
• long service pensions;
• upon reaching old age;
• due to disability;
• social pension.

State pension provision is financed from the federal budget. This is done from the amounts of the single social tax, for the transfer of which the employer is responsible.

The state pension system consists of two parts:

• state pension provision;
• state pension insurance.

Aspects of compulsory insurance

The main thing in the insurance system that ensures compulsory pension payment is the creation of a certain reserve of funds through the employer’s constant transfer of a certain amount to the employee’s personal account:

• in the Pension Fund of Russia;
• at the Non-State Pension Fund.

A citizen’s pension savings can be increased as a result of their competent management and through proper investment. In particular, by concluding an agreement with a non-state pension fund, and also as a result of independent additional pension contributions under the state pension co-financing program or additional pension provision.

So, now we can consider the funds allocated to retired persons as the sum of three components, which are the mandatory pension systems of the Russian Federation:

• Insurance;
• Cumulative;
• Additional.

What is the essence of private pension funds?

Non-state pension provision is engaged in creating additional support for the elderly population, using money invested by interested people, as well as from payments from employers. Thus, the additional pension is formed and paid from the amounts of transferred pension contributions.

In 2017, the government decided to increase the retirement age for civil servants. Each year, six months will be added to the retirement age until women retire at 58, and men at 63.

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