Retiring at 65: as the Finance Ministry proposes reformirovat pension system

The Finance Ministry proposes once again to reform the pension system. A letter with their proposals (have) the Ministry of Finance sent to the Ministry of labor, which ferried them to the government, fulfilling the instruction of Dmitry Medvedev from 18 February 2016. The text of the order is not in the public domain.

In the list of the Ministry of Finance six innovation.

The Agency proposes to increase the retirement age to 65 years for men and women. Now men can retire at 60 and women at 55 years. The Finance Ministry wants to increase gradually — from 6 to 12 months a year. According to authorities, in favor of increasing the retirement age speaks a multitude of economic, social and demographic factors. In particular, this need is caused by the Ministry of Finance explains that the average life expectancy is only since 1995 has increased by 5.2 years for women and 7 years for men.The current retirement age in Russia was installed in 1932. Women in Russia live on average of 77.2 years in Europe — 80.9 years, but retire at the same time overlook in 63 years, not 55, as we have.

The second proposal of the Ministry of Finance not to pay pensions to working pensioners — and those who have regular work those who are engaged in hazardous work, and therefore has the right to early retirement. Now over half of the citizens after the appointment of early retirement continue to operate, and accordingly an accident, associated with early disability due to exposure to harmful and dangerous working conditions, does not occur, indicates the Finance Ministry. In October 2015, the Pension Fund evaluated the number of working pensioners in 14 million people — worked about every third. The pension Fund reported that in 2016 the cost of the payment of early pensions will be doctors than 94.69 billion. According to the Director of the Institute of labour and social security RANHIGS Alexander Safonov, all categories “dosrochnikov” annually spends about a third of the total expenditures of the budget of the Pension Fund.

Teachers, medical professionals and creative workers, the Finance Ministry proposes to gradually increase the requirements for experience that is necessary for early retirement. Specific numbers, the Ministry of Finance does not call.

The fourth measure, which is proposed by the Ministry of Finance, is the reduction in the annual indexation of pensions. Macroeconomic situation forces to save budget funds, the Ministry insists. Now the rules of indexation of insurance pensions (which is talking the Finance Ministry) spelled out in the Federal law “About insurance pensions”. They should increase annually by 1 February the level of inflation over the past year, and then from April 1, the government may take a decision on further increases. The costs of the Pension Fund for the payment of pensions and allowances in 2016 is planned at level 6,5 trillion rubles (104,2% higher than in 2015).

In addition, the Finance Ministry proposes to return to a single rate of insurance premiums on compulsory insurance in the budgets of state funds, and to pay contributions to the Pension Fund not with wages up to a certain limit, and with full volume. Now insurance premiums are paid separately in each state extrabudgetary Fund. In 2016 the value base for calculation of insurance contributions is 796 thousand 718 thousand respectively.

The latest initiative of the Ministry of Finance in its reform of the pension system. The Agency proposes to translate it of the required format in a quasi-voluntary. As previously wrote the design of the system, which shall be a charge on additional contributions from the salary the Ministry of Finance has worked with the Bank of Russia. The concept of quasi-voluntary system means that the employer will allocate 22% of contributions in full in the insurance part of pension, and savings will go additional percent of salary from 1 to 6%. In the first year of the contributions according to their plan offices should not be charged, in the second to reach 1% in the third — 2% and so on until they reach 6%. To enumerate the contributions will be the employer, keeping a percentage of the employee’s salary (so, for example, arranged the collection of income tax), told the sources . Citizens will be able to refuse to participate in this funded system, writing a statement. Besides, as Kommersant wrote, the Central Bank and the Finance Ministry is offering to give citizens ownership rights to their pension savings and the ability to spend it until retirement age. Funded part proposed to be renamed “individual retirement capital, which will include all accumulated and before, wrote “Vedomosti”.

The system will be empty

“It seems to me that the proposals of the Ministry of Finance is a “plan B” prepared in case a political decision to completely eliminate the accumulative pension system in its current form,” says Chairman of the Board of Directors of the European pension Fund Evgeny Yakushev. The Finance Ministry proposes to actually make a copy of the existing system, but in a quasi-voluntary format of contributions, he adds. Thus if we allow citizens to pick up the accumulated funds, the system can quickly be emptied, says Yakushev. “For example, in Kazakhstan, the authorities allowed citizens to take retirement savings if they move to Russia. Just a temporarily registered in Russia and withdrew their money. In the end this option was ruled out”, — said Yakushev

“Citizens will be released from the system as soon as you realize that it can be done,” — said the head of a major private pension Fund. In his opinion, the possibility to deduct an additional percentage of your salary almost no one. The surcharge will be perceived negatively and as a sign of protest, many will leave the system,” he adds.

The transition to quasi-voluntary funded system may lead to the elimination of this element, the feared chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin. In his view, should by all means try to keep a contributory system in the required format. Funded system cannot exist in a voluntary format, believes Advisor to the President of the National Association of pension funds Valery Vinogradov. “People simply cannot afford to accumulate further,” he says.

The main problem to be solved in the near future, demographic, says chief economist at FG BCS Vladimir Tikhomirov. So raising the retirement age is inevitable. Soon will retire many of the post-war generation when there was a surge in the birth rate), because of this, the number of employed people will be less retirees, a burden on the budget will grow significantly, said Tikhomirov. Most of the proposals of the Ministry of Finance must implement to correct the situation with the budget, but they are unpopular, so most likely they will not make before the election, said Tikhomirov.