| Private companies are content with the minimum For the third month now, Russians have had the opportunity to enjoy the first fruits of the pension reform. At the end of last year, 42 million future retirees could entrust the funded portion of their future pension to a private management company. However, the main stage of the most important reform was so crumpled that today even its immediate implementers cannot say at what stage it is. By the way, many of them have already changed jobs. For example, Mikhail Zurabov was “transferred” from the post of head of the Pension Fund to the Ministry of Health, to a more important area of work on reforming the compulsory medical insurance system. One of the main ideologists of the new principle of pension provision, Deputy Minister of Economic Development Mikhail Dmitriev, characterizes the situation as follows: “The reform is not completed, but has become irreversible, but we are not satisfied.”
The Vremya Novostey newspaper plans to study the consequences of the pension reform on a new thematic page “Personal Account”.
The state, it seems, achieved exactly the result it had hoped for: all responsibility for pension provision for citizens in the future fell on the citizens themselves, while all the funds of the Pension Fund still remained with the state.
The meaning of the new pension system was initially to make the size of a citizen’s future pension dependent on the number of contributions he paid to the pension fund. That is, to interest citizens in paying the unified social tax (UST) and force employers to bring wages out of the shadows. There was another problem on the agenda. From the Soviet Union, Russia inherited a pay-as-you-go pension system, in which all contributions to the Pension Fund from working citizens were divided among today's pensioners. However, the negative forecast for the demographic situation in Russia suggests that the number of workers will decrease, and the number of pensioners will increase, and the distribution system will soon not be able to provide for pensioners. World experience has long offered a way out of this situation - the creation of a certain investment reserve in the structure of the pension fund, the funds of which are invested in the economy and bring profit that covers negative demographic trends. High oil prices and the favorable demographic situation of recent years, when an extremely small military generation retired, according to Mikhail Zurabov, provided Russia with a “window of opportunity” to switch to new principles of pension provision.
As a result, Russia settled on a scheme in which tax payments to the Pension Fund and, accordingly, pension payments to citizens are made up of three parts. The basic part of the pension remains distribution, it is the same for everyone and is paid according to age. The insurance part is calculated based on many parameters, such as length of service, last salary, etc. And finally, the funded part of the pension is formed from tax payments of citizens on a personal pension account. In the West, over 25-30 years of work experience, a sufficiently large amount accumulates in a citizen’s pension account, allowing him to comfortably meet old age. For banks, pension accounts of citizens are extremely profitable, as they provide “long-term” money, so the interest rates on them are the most attractive. There are many pension schemes, but if in the West pensioners live mainly on the interest from a pension account, and the account itself can be bequeathed to their children, then Russia, as always, has taken a different path. Pension Fund experts have calculated that the average citizen lives 19 years after retirement. Accordingly, the amount accumulated at the time of retirement is divided into 19 years and 12 months - this money will constitute an increase to the monthly basic and insurance parts of the pension. Needless to say, if a pensioner “suddenly” lives less than 19 years after retirement, he will not be able to bequeath the rest of his money to anyone. A citizen can study the stock market, choose the most reliable state and non-state management companies, various investment packages, but he should not forget the main thing: the money paid in the form of taxes belongs to the state.
Such a scheme, even theoretically, raised many questions, and when it came to putting it into practice, the authorities once again demonstrated their commitment to the principle “they wanted the best, but it turned out as always.” In the first half of 2003, the reform was completely forgotten. Mikhail Dmitriev, who accused the government of missing the deadline, received a warning about incomplete official compliance, and the reform was extended. Then the Pension Fund did not meet the allotted time. The Pension Fund was supposed to send out 42 million “chain letters” to future pensioners by August 1 with information about the state of their personal pension account, so that citizens would decide the fate of their pension savings by October 15. They were offered to either leave the money with the state by default (Vnesheconombank was chosen to manage the money of the “silent ones” on behalf of the state), or transfer it to a private management company. However, the Pension Fund did not meet the deadline and was forced to extend the mailing until December 1. They did not reprint the circulation, so in November citizens continued to receive letters marked “valid until October 15.” The situation was complicated by the fact that none of the future pensioners knew the list of private management companies allowed to work with pension savings, since the Ministry of Finance, in turn, missed the deadline for holding a competition for their selection. Business expected that at least 10% of citizens, or about 4 million people, would transfer money to the private sector, so many management companies made serious efforts to win the competition. However, due to the lack of necessary information, only about 700 thousand people turned out to be such. As a result, each of the 55 companies that passed the rigorous selection accounted for approximately $1 million, despite the threshold for profitability of managing the investment package being estimated at no less than $30 million.
But the management companies did not receive this money on time. The Pension Fund of Russia was supposed to transfer them before January 1, but it turned out that the management companies selected through the competition cannot use the services of banks that did not pass the competitive selection of the Ministry of Finance. Another competition jeopardized the March 31 deadline for transferring money. True, Deputy Finance Minister Bella Zlatkis recently said that the Pension Fund has already sold the entire package of government securities in which citizens' pension savings for 2002 were invested, and will have time to transfer the proceeds to both state and non-state management companies by the end of the month.
According to Mikhail Zurabov, in 2002 the Pension Fund received a fantastic profit on invested funds - at the level of 40% per annum. Bella Zlatkis notes that the financial result of the package of securities sold by the fund in March “represents a sensation.” Professional economists were thrown into confusion by such figures, since the Pension Fund has the right to invest money only in Russian government securities that show negative returns. However, no matter how controversial the methods for calculating the fund’s profit may be, it is clear that if private companies had to compete with the state also in terms of profitability, then they would have no prospects of establishing themselves in this market, even in theory. However, in the coming years, the Pension Fund’s profits, according to estimates, may well give way to losses. And then even moderate interest earned by private management companies will seem to future retirees a quite attractive level of income. Alexander GUDKOV |
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