Translated material
Live hard
Retirement age as an inevitable problem
Raising the retirement age for Russians seems increasingly inevitable to government officials. At least they began to talk about it with enviable regularity. The latest to say that sooner or later the retirement age in Russia will have to be increased was recently stated by the head of the Russian Pension Fund, Anton Drozdov. He did this just a few days after Prime Minister Vladimir Putin announced that the issue was not yet being discussed in the government. Experts consider raising the retirement age inevitable, but they doubt that President Dmitry Medvedev will take responsibility for such an unpopular decision even before the 2011-2012 elections.Last week, during the 19th Baltic Conference on Social Security in Kaliningrad Svetlogorsk, where the development trajectories of the pension systems of the countries of the region were discussed, Chairman of the Board of the Pension Fund (PFR) Anton Drozdov said that we are nowhere from the problem of raising the retirement age of Russians we won't leave. We “will have to make that decision,” he said. The official admitted that the fund is already making “the necessary calculations together with other departments” regarding increasing the retirement age.
Before Mr. Drozdov, Deputy Prime Minister and Minister of Finance Alexei Kudrin said almost the same thing at the St. Petersburg Economic Forum in early summer (see Vremya Novostey, June 22) . According to him, the demographic problem in Russia is more acute than in other countries. Now we have 128 workers for 100 pensioners (in leading European countries there are 150-160 employed per 100 workers). By 2020, our figure will drop to 112 workers per 100 pensioners, and by approximately 2030 the number of citizens of working age and retirement age will be equal. Meanwhile, Mr. Kudrin said, “the populist policies of the Russian government have created an unwieldy system of social mandates.” Even a noticeable increase in the fiscal burden on the economy due to an increase in insurance premium rates in 2011 from 26 to 34% of the wage fund will not solve the problem of the Pension Fund deficit: it will still be approximately 1 trillion rubles. Therefore, Alexey Kudrin is convinced that the retirement age will inevitably be raised. “In a year or two, but this will have to be done,” the minister assured, referring to the adoption of a fundamental decision.
Somewhat earlier, another Deputy Prime Minister, Alexander Zhukov, based on the fact that the average life expectancy in Russia has been increasing slightly in recent years, spoke about the threat of an aging population, which causes additional burden on the pension system and healthcare. He used the following figures: if now we have 580 disabled people per 1,000 workers, then by 2020 their number will increase to 837. In such conditions, to solve the “difficult and ambitious task” of bringing the average pension by 2016 to 2.5-- 3 living wages for people of retirement age will be very difficult for the government, the Deputy Prime Minister warned.
Of the interested departments, so far only the relevant Ministry of Health and Social Development has not been so clear on this issue. Its head, Tatyana Golikova, stated that the decision to raise the retirement age could be made no earlier than 2015. And her deputy, State Secretary of the Ministry of Health Yuri Voronin, generally said that raising the retirement age would cost the budget even more than maintaining it at the current level. After all, older pensioners will be able to claim higher pensions. And as a result, by 2030, the Pension Fund deficit may double its current level. And in the first years after raising the retirement age, it will be possible to save no more than 80-90 billion rubles. per year.
Back in June, the head of the Pension Fund of the Russian Federation, Anton Drozdov, also called for no rush to raise the retirement age. He proposed returning to the discussion of this issue no earlier than in 2012, since it is first necessary to complete the transition to insurance principles for the formation of pension savings, wait for the results of the upcoming increase in insurance premium rates in 2011, solve the problem with the funded part, and decide on a new design of the pension system .
Now, in the mouth of Mr. Drozdov, the idea began to look more elaborate. He drew attention to the fact that before a general increase in the retirement age, the problem of early retirement must be solved. “A third of Russia’s population retires before the general retirement age due to benefits that were established, among other things, back in Soviet times,” said the head of the Pension Fund.
Commenting on the bold statements of officials on such a sensitive topic for society, most analysts have always agreed that no sharp movements in this direction should be expected until the end of the next election cycle, that is, until 2012. The majority of the population is against raising the retirement age. “A few percent of the population support this idea,” says Yevgeny Gontmakher, board member of the Institute of Contemporary Development. Indeed, the post-election period marks the beginning of such high-profile reforms as changes in the mechanisms for financing budgetary institutions in the field of education, culture and healthcare, reform of the transport tax with a likely increase in the fuel excise tax, an increase in the water tax for public utilities, and the introduction of a new property tax.
Considering the prevailing mood in society, it is natural that all potential participants in the 2011-2012 election process speak out against raising the retirement age. For example, the leader of the Communist Party of the Russian Federation Gennady Zyuganov called Alexei Kudrin’s June statement a sabotage and suggested “tearing off his ears along with his head.” Not only all opposition parties, but also the ruling United Russia spoke out categorically against raising the retirement age. Chairman of the State Duma Committee on Labor and Social Policy Andrei Isaev accused the Minister of Finance that “he is trying to cause discontent among voters in order to reduce the result of United Russia in the elections.” Relatively recently, on August 31, at a meeting with Norilsk Nickel employees, Prime Minister Vladimir Putin said that “the issue of raising the retirement age is not being considered.” “There is, however, a deficit in the Pension Fund, but we are still able to cover it from the federal budget,” the head of government reassured the public, although a categorical “no” does not follow from his words either.
Dmitry Medvedev last spoke out against the idea of raising the retirement age when he was still first deputy prime minister. The presidential budget address for 2011-2013, released at the end of June this year, speaks of the need to “develop a clear program for the long-term development of the pension system”, which would provide “a socially acceptable level of pensions and at the same time excluded both a further increase in the rate of social contributions and an increase in the deficit of the pension system.” So far, the only option under discussion that satisfies all these conditions is raising the retirement age.
But one of the initiators of the start of a broad discussion of the topic of raising the retirement age was presidential aide Arkady Dvorkovich (see Vremya Novostei, April 12) . At the beginning of April, at the conference “Population Saving” organized by the State University Higher School of Economics, he called for bolder discussion of the topic of changing the retirement age. “We are lying to ourselves when we say people are not ready. We just need to carefully start discussing how this should be done,” Mr. Dvorkovich advised then.
Experts interviewed by Vremya Novostei consider it unlikely and irrational for the authorities to increase the retirement age before the end of Dmitry Medvedev’s current presidential term. “Even if he doesn’t go to the polls, no one will seriously think that Vladimir Putin is not behind his decision. Still, they work in harmony,” says Vyacheslav Bobkov, general director of the All-Russian Center for Living Standards.
Evgeniy Gontmakher, although he stipulates that in our conditions “nothing definite can be said; “We do a lot of things spontaneously,” he still believes that Dmitry Medvedev, even if he wanted to, would not be able to take responsibility for an unpopular decision only on himself. “The decision to raise the retirement age cannot be made by presidential decree. This can only be done by law,” argues Mr. Gontmakher. - Even if it is introduced by the president, it cannot be adopted in one day. Widespread discussion cannot be avoided. The communists will simply stand against this decision with their horns. Even if we expect that United Russia deputies, obeying party discipline, will support such a bill, this sharply reduces their chances of any successful result in the 2011 Duma elections, of a constitutional majority. In this sense, there is very little time - there are three sessions left before the elections (State Duma - Ed. ). It's very risky now."
But when the parliamentary and presidential elections are held, Mr. Gontmakher believes, the new head of state, who will have six years ahead, may make such a proposal. And the Duma, which will have five years before elections, will accept it. Until the next elections, “everything will settle down, the people will get used to it.”
Moreover, of the models currently being discussed for changing the retirement age, according to the director of the regional program of the Independent Institute of Social Policy (NISP) Natalya Zubarevich, the one in which the innovations will affect only the young will most likely be chosen. “Those who are retiring soon will not be affected by the reform. A gradual, six-month increase in the retirement age for those who are currently 25-30-35 years old will be announced. That is, they will know that they will have to retire later than the current older generation. Politically, this concept is relatively safe. But the generation that is now over 40 years old will live on a meager pension,” Ms. Zubarevich believes.
“It is possible, as in Ukraine, to raise the retirement age for women and leave it the same for men (for whom it is now higher. - Ed. ),” suggests Evgeniy Gontmakher. Both options, in his opinion, carry minimal political risks. “The majority of the electorate who go to the polls will understand that this does not concern them, and young people usually do not think that they will live to see retirement,” says the expert.
At the same time, not all experts are confident in the fundamental advisability of raising the retirement age. “On the one hand, there are not enough labor resources. But, on the other hand, most of the unemployed are young people. By increasing the retirement age, we are further blocking the way for young people, keeping older people in the workplace,” warns Vyacheslav Bobkov.
“This decision is not economically calculated. There will be no savings, but there will be additional expenses,” warns Natalya Tikhonova, head of the Department of Socio-Economic Systems and Social Policy at the State University Higher School of Economics. “The health of our elderly is incomparably worse than their peers in the West. At one time we carried out a comparative analysis with the British. There is approximately a 15-year difference in health status between citizens of our countries. That is, their 65 years of retirement are our 50 years. Employers will get rid of the elderly workforce,” Ms. Tikhonova is convinced.
In addition, two thirds of Russians who have reached the current retirement age objectively have every reason to register their disability. “They just don’t do this now, so as not to bother with documents. If you increase the retirement age, they will immediately come to clinics to receive disability. Social expenses will only increase from this, plus we will expose the budgetary sphere, where older people are now largely filling the niche of low-paid jobs,” the specialist believes.
The Pension Fund is aware of the difficulties mentioned by experts. As its head Anton Drozdov said, increasing the retirement age should be based on solving three problems. First, public consensus must be reached on this issue. Secondly, the average life expectancy of citizens in Russia should increase. 20% of men who turn 60 do not live to see 65. “If we tomorrow increase the retirement age for men to 65, then on average they will remain in retirement for a little more than ten years,” he explained. And thirdly, before raising the retirement age, it is necessary that the country has a sufficient number of jobs for older citizens, most of whom are disabled.
Therefore, for now, the Pension Fund is considering more accessible mechanisms for solving the problem of its budget deficit. In addition to the upcoming increase in the rate of insurance fees to the Pension Fund from 20 to 26% of the wage fund from January 1, 2011, the head of the Pension Fund suggests taking a closer look at the possibility of increasing the threshold of earnings subject to insurance contributions. Currently, insurance premiums are taken from annual earnings not exceeding 415 thousand rubles. But the law “On Insurance Contributions” gives the government the right to annually index the limit based on the growth of average wages. At a conference in Svetlogorsk, the head of the Pension Fund of the Russian Federation said that, according to calculations by the Ministry of Economic Development, in 2011 the maximum amount for taxation of insurance premiums could be 463 thousand rubles. “In our opinion, it is necessary to think about increasing the limit of taxation of annual income, which will allow, on the one hand, to increase the income of the fund’s budget, and on the other hand, to accumulate more pension rights for the insured,” suggested Anton Drozdov. According to his calculations, in 2010, about 17-20% of citizens' salaries fell out of the base for the formation of pension rights.