Finance Ministry proposes to allow self-investment of pension savings

The Ministry of Finance proposed to transfer the pension savings of citizens to their property. This measure was discussed at a strategic session on the development of the financial market in the government on August 30. The proposal to “privatize” the pension savings of citizens (exactly in this wording. – Vedomosti) was included in the joint presentation of the Ministry of Finance and the Central Bank, presented at a meeting by the Minister of Finance Anton Siluanov and the chairman of the regulator Elvira Nabiullina (Vedomosti has it). The initiative is included in the block dedicated to the development of the pension and insurance market, according to the meeting participant, this part was presented by the Ministry of Finance. This is about giving citizens who have pension savings the right to invest them of their choice, albeit subject to certain criteria, explained another source who also participated in the meeting.

Such savings were formed as follows: before 2014, 6 percentage points of the insurance rate of 22% were the so-called funded part of the pension, which could be disposed of more freely than the insurance part, for example, transferred to a non-state pension fund to increase profitability. But since then, there has been a moratorium on the formation of such savings, at the end of last year it was extended until 2024.

The “privatization” of pension savings means the transfer to the ownership of citizens of the savings formed under the compulsory pension insurance system (OPS), but frozen since 2014, with the right to more freely dispose of these funds, Anatoly, Chairman of the State Duma Committee on the Financial Market, confirmed to Vedomosti Aksakov. Today, savings are actually in state ownership, although this is more of a technical nuance, but it is supposed to be overcome.

Now the possibilities of Russians who have such funds are limited by the transfer from one NPF to another, Aksakov recalled. It is planned to form a system when citizens will be able to choose whether to leave their money under the management of the fund – PFR or NPF – or invest on their own, albeit according to clearly regulated criteria, the deputy explained. At the moment, according to him, the model is being formed, while it is premature to discuss the details. But we are talking about investments, the right to withdraw funds “as from a deposit” is not expected, Aksakov specified. Specific details were not discussed at the meeting – they are being worked out now, another participant of the session confirmed.

In addition to “privatization”, the block of proposals of the Ministry of Finance for the development of the pension and insurance market includes the following initiatives:

– development of corporate pension programs;

– stimulation of non-state pension funds for long-term investments;

– modernization of tools for long-term investments of individuals;

– tax incentives;

– introduction of a system for guaranteeing long-term savings.

Similar proposals, apart from the initiative to “privatize” pension savings, were presented by the Central Bank in its report “Financial Market: New Challenges in Modern Conditions”. In the document, the regulator, for example, reported that corporate voluntary pension savings systems need to be supported – they can become the basis of a new savings system. Under the “support” of the Central Bank and the Ministry of Finance meant tax incentives, but its specific parameters were not named at the meeting, Aksakov said. Previously, the idea of ​​establishing tax incentives for citizens’ incomes, which are sent to the NPF, was discussed, he recalled. For example, if a citizen sends up to 6% of income to the NPF, then his personal income tax base will decrease by 36%. Accordingly, there is an incentive to direct funds to the funded system, and then invest them in various assets, Aksakov concluded.

Also in the report on the prospects for the financial market, the regulator announced that it would consider the abolition of part of the requirements for the structure of NPF investment portfolios. At the same time, the risks of funds will be limited by the requirements for their stress testing. At the meeting, it was mentioned that the list of available long-term instruments could be expanded for individuals, Aksakov said, but also clarified that no specific examples were mentioned at the session.

The implementation of this policy should make it possible to increase the additional pension income of citizens from 8% in 2022 to 9.1% in 2025 and 10.8% in 2030.

Representatives of the Ministry of Finance and the Central Bank did not respond to a request from Vedomosti.

In fact, NPFs existed in a closed monetary system: the main source of both replenishment and losses was the result of investments from transactions that did not increase the market in a global sense, Pavel Mitrofanov, CEO of Expert Business Solutions, recalled. Now 4.5 trillion rubles are “mothballed” in the NPF. pension savings, follows from the data of the Central Bank for the I quarter. The lack of new enrollments is a fundamental problem rather for citizens, while the system itself feels confident, the expert continues.

“Big” money does not enter the system also because of the specifics of the strategies of private funds. At the moment, NPFs manage funds in a short-term investment paradigm: funds need to report annually to clients on the results and at the same time charge a commission, explains Mitrofanov. There is currently no incentive for long-term investment, nor for the system to expand with new cash flows, he adds.

The proposed measures may become a trigger for new contributions from citizens to the pension system on a voluntary basis, predicted a representative of the NPF of Sberbank, the largest NPF, according to the Central Bank for the third quarter of 2021. According to him, Sberbank supports the initiatives of the Central Bank and the Ministry of Finance.

Most likely, “unblocking” means that savings can be transferred to the property of citizens in the format of a standard program of non-state pension provision (NPO), suggested in the NPF of Sberbank. In this case, citizens themselves will be able to continue making contributions to their additional non-state pension, the representative of the fund explained.

There will be demand for pension products, especially if additional tax incentives for citizens and co-financing from the state are provided at the legislative level, he continues. The NPF of Sberbank expects that the initiative will help increase the number of NGO participants by at least 2 times over the next five years.

In the context of freezing the replenishment of pension savings under the OPS for a citizen, the only alternative to increase future pension capital is participation in individual accumulation programs, says a representative of the NPF “Opening”, the third largest asset of the fund. For example, large employers, with the help of NPFs, are implementing the corporate plans of NGOs, the representative of the Otkritie Foundation added. The ability to replenish the account in corporate programs at the expense of previously formed savings for compulsory insurance to a certain extent revives the market, he continues. In the absence of a detailed bill, it is too early to make forecasts on the issue, concludes a representative of NPF Otkritie.

Assets in NPFs are almost not growing, therefore, without significant co-financing of any pension initiatives of citizens from the state, nothing will work, says Mitrofanov. Until the government and the Central Bank find significant incentives, for example, for employers, this factor will not fundamentally change, the expert concludes.