Voluntary-forced: how will it be funded pension

The current system of mandatory pension insurance has outlived its usefulness: freezing of pension savings threatens to become eternal, and because of the lack of influx of new money NPF a few years to face difficulties in the payment of pensions. Therefore, the Ministry of Finance and the Central Bank believe that the current system of pension savings need to upgrade to the voluntary, when contributions for their future retirement citizens will be expected to deduct from their paycheck. Instead, the Russians promise to give tax benefits and the right to withdraw part of the accumulated money for their own needs.

The Ministry of Finance and the Bank of Russia opened on Friday, September 23, a detailed version of reforming the Russian pension market, which could be launched in 2018. As told in the Moscow financial forum Deputy head of the Ministry of Finance Alexey Moiseev, the authorities recognize that the freezing of pension savings for the past three years has undermined the credibility of the pension system. However, the Finance Ministry wants to give the Russians the opportunity to actively control the future pension capital, sees the willingness of the Russians to accumulate for retirement. “Citizens will form their pension capital on their own,” — said Moiseev.

Uniform rules for all

To save for retirement themselves, employees were more interesting, the Ministry of Finance and the Central Bank propose to provide benefits in the form of a tax deduction received for the account of the pensioner in the Fund. However, the exemption will apply only to the same 6%: if, for example, a citizen will defer 30% of their earnings, tax credits will still pay only for the amount not exceeding 6% of his salary.

In addition, future retirees will be able to prematurely withdraw part of the accumulated pension money — not more than 20% of the total bill — spending them on your own. The Ministry of Finance and the Central Bank is also contemplating to allow early withdrawal of the entire amount of accrued pension money to those who were in “difficult life situations”, for example, because of illness or temporary disability.

However, to call the proposed voluntary system can only conditionally. As told to Moses, to participate in it will, by default, all able-bodied population of the country. Part of their salary automatically goes to pension account in one of the selected APF. In the first year of contributions transferred will not, in the second year it will be 1% of earnings, and in the fifth year of income will be charged for 6%.

If future pensioners will decide to entrust their fate to the state and wants all the premiums the employer has listed to the Pension Fund of the Russian Federation, he will have to specifically write about this statement. And to do written statements need every five years, since version the final refusal of the reform of the Ministry of Finance and the Central Bank does not provide.

In the new pension system will also be a Central administrator who will work as a specialized Depository and to carry out the functions of registration of pension rights, said Moses. According to him, it will be a commercial organization. Now functions for accounting of the pension rights by the Pension Fund, he recalled.

Pension undecideds will turn into points

Do not get the Russians and the remaining “undecideds”. If passed a version of pension reform proposed by the Ministry of Finance and the Central Bank, their pension savings that are controlled by the State management company (GUK) — VEB will be “transformed” into points of the Pension Fund of the Russian Federation.

“While this is only a suggestion. It will be discussed. There is a problem in that some people just wanted to have their savings managed by the state. Their opinion should be considered” soothes Moses. The Deputy Minister said , that does not preclude the sale of securities and pension portfolio of the Bank, “but they will not be sold simultaneously, and as necessary”.

“It is possible to channel interest income from the securities under management by the STMC to cover those pension obligations that will appear in the FIU, and it is possible to wait until the bonds are repaid and direct the revenue to reduce the deficit of the Pension Fund”, — said Moiseev.

According to the beginning of July, the net asset value of the enlarged portfolio of the State of UK amounted to 1.83 trillion rubles, another 27.3 billion rubles of pension savings was in the portfolio of government securities. Of these, more than 750 billion rubles it invested in government securities, and 680 billion rubles in corporate bonds.

Formal proposals from the Ministry of Finance in the State criminal code is not received,” — said the press service of the Bank.

The same fate will befall and savings, which are now managed by private UK — about 40 billion rubles, according to the National League of asset managers.

As for the pension savings managed by the NPF (more than 2 trillion rubles), of them, according to the proposals of the Ministry of Finance and the Central Bank will leave the property of citizens. Moreover, the retirement accounts will be replenished through voluntary contributions from wages.

The influx of money in the Fund will not

NPF consider that the proposals would benefit their business, however I doubt that the participation of citizens in the new pension system will be massive. “The proposals of the Ministry of Finance and the Central Bank is best for NPF. We have a lot of people form their pensions voluntarily. If the government encourages people to save for retirement on their own, this will lead to increase inflow of money into funds”, — said General Director of NPF Sberbank Galina Morozova. In her opinion, it is important that the concept provides for the need every five years, to write a statement refusing to transfer pension contributions. “You seem to constantly remind you that you need to take care of their old age. Perhaps that man now has no funds, but in five years he will be reminded of this, and it will start to save for retirement,” says she.

“Hope that the people themselves will be something to pay is not necessary. If it is really what to deduct, then the choice will be made in favor of future pensions, because the need to spend in the here and now is more important. Moreover, the confidence that the rules on the pension market will not again change close to zero”- said the head of Association of pension funds Sergey Belyakov.

“Obviously, given the low wages in the regions and reduction of incomes of a significant inflow of voluntary pension contributions will not. In addition, the younger generation in General disappointed with the retirement policy of the state”, — said the head of the National Association of pension funds Konstantin Ugryumov. However, according to him, the market of mandatory pension insurance is still in need of reform. “In 2022, the NPF will begin EN masse to pay pensions, and without the influx of new money, assuming the extension of the freezing of the savings will come the collapse of the system. Investment activities will lose all meaning, funds have to sell assets at any price to fulfill their obligations. Ultimately all that will damage the interests of future pensioners”, — he explained.

Undecideds will help the budget

Market participants believe that the proposal to transfer the points the pension savings of undecideds and private funds in the UK due to the shortage of funds in the pension system. “In the pension system deficit. They are just these funds will cover another problem. Securities will be sold gradually, it will last for many years. I find it difficult to assess the impact, — said the ex – Finance Minister Alexei Kudrin, the intention of the authors of the new pension concept to translate savings of undecideds to the FIU.

“We can assume that the transfer of money undecideds to the pension Fund required to Finance the budget, but the fact that 90% of the portfolio of the Bank in government and corporate bonds. To get money, they need to sell that will make it very difficult: in the funds is almost no money available, there are only banks. But it is unlikely they will be delighted with this proposal,” — said Galina Morozova.

As previously mentioned , in August of 2016 from the Reserve Fund to cover the deficit of the budget was spent 390 billion rubles In 2017 to cover the deficit will have the expense of the NWF. If the Reserve Fund continues to be spent to cover the Federal budget deficit at the current rate, then in 2017, the Fund will be exhausted, said Deputy Finance Minister Alexei Lavrov.

According to the Finance Ministry, by early September, the Reserve Fund was left of 2.09 trillion rubles., that is, from the beginning of the year its volume has decreased by more than 1.5 trillion rubles. Most of this amount (about 1.2 trillion rubles) is the cost of financing the budget deficit, the rest is a result of foreign exchange revaluation of foreign currency assets of the Fund. According to the Bank of Russia until the end of 2016 from the Reserve Fund to cover the budget deficit will be spent 1.2 trillion rubles By the end of the year, the Fund will be approximately 900 billion rubles, if the ruble strengthened — even less.

Numerous consequences
“The government badly chosen time for the next pension reform. First, the people now have no money to save for retirement. Secondly, as only citizens will hear about the transfer of savings in points, even after two or three years nobody is going to pay for retirement from your paycheck. Confidence in the pension system will be undermined”, says the head of a major pension Fund. He fears that the next step could be withdrawal of money from the NPF.

In NAPF fear that if the proposals of the Ministry of Finance and the Central Bank were adopted, it would lead to negative social consequences. The money transfer undecideds pension points is very hard. It is absolutely meaningless from the point of view of economy, because right now these funds are placed in government bonds. It turns out that the state simply delays the onset of disasters in the future, increasing social obligations. Obviously, this is due to the hysteria about the budget deficit,” says Ugryumov.

He also did not rule out that may instead lead to new state costs. “The news that the accumulation of undecideds will be transferred to the pension points may cause a new wave of Exodus of citizens in NPF. It is not clear where in this case the budget deficit would take money the state”, — says Konstantin Ugryumov. High demand for the transfer of pension savings in the NPF was observed at the end of 2015, when the government stated that it would not renew the right of the “undecideds” to choose the funded part of pension. The funds then talked about the increased flows of clients.

“The influx of customers can really begin, but it’s not very good: typically, the number of statements on the transfer of pensions is growing rapidly at the end of the year. This increases the risk of a possible technical error”, — says Galina Morozova. She recalls that by the end of 2015 of 10 million citizens filed applications for the transfer of pension FIU met only 60%. The remaining savings left in the Bank.

The Ministry of Finance do not exclude such development of events. “If people write statements transition to the NPF, you will need to consider the transfer of funds of assets managed by HUK. But not to sell them in the market”, — said Moiseev.