Indexation of pensions from June 1: should older Russians count on a gift from the state

Experts assessed the pros and cons of a possible unscheduled increase in pension payments

The closer the first day of summer, the more unrest in society, the media and expert circles about the possible unscheduled indexation of pensions. The fact is that exactly a year ago, on the 20th of May, President Putin announced a similar measure – an increase in pensions for non-working pensioners by 10% from June 1, 2022. At that time, this step was explained by the inflation that had gone off the rails in earnest, which, against the backdrop of the “sanctions war,” went off scale in the spring by 17%. Now inflation is 7 times (!) less, but it is unlikely that this has made the life of 35 million Russian pensioners much easier. Do they have the right to hope for a new social “gift” from the state?

Recall the circumstances of a year ago. On May 25, 2022, at a meeting of the State Council dedicated to the issues of social support for the population, Vladimir Putin announced an unscheduled indexation of pensions by 10%. Since June 1, all insurance old-age, disability, survivor’s pensions, state pensions and social pensions have been indexed. This made it possible to increase the incomes of 35 million non-working pensioners. The average pension in the country at that time increased from 18,984 to 20,882 rubles. Moreover, the total amount of indexation (and it was the second in that year) made it possible to cover annual inflation, which rose to almost 18% at its spring peak last year.

That generous social step on the part of the state has clearly sunk into the souls of the Russians, who now dream of repeating last year’s plot already in the current year, 2023. However, today the situation in the economic sky is completely different. There are two fundamental differences. First and foremost is the radically changed situation with inflation. It is in our country today, according to official data, not at all 17-18%, as it was a year ago, and not even 10-11%, as in this January, but less than 2.5%. Accordingly, the indexation of insurance old-age pensions by 4.8%, carried out at the very beginning of this year, in theory more than covers this inflation.

The second and no less important factor is the growing federal budget deficit. Last year, our country entered with a confident budget surplus (for the first 4 months of 2022, treasury revenues exceeded expenditures by a trillion rubles), which means that it had funds for more or less generous social “gifts” to citizens. And now the federal budget is deeply in deficit: the hole in it reached 3.4 trillion rubles in April, which is almost 850 billion more than the government planned for the whole year. Against this background, it will be extremely difficult to find almost half a trillion rubles (which was how much last year’s June indexation of pensions cost).

Based on these factors, most experts advise older Russians not to indulge in unrealistic hopes for a new indexation. “A repeat of last year’s decision is very unlikely,” Mark Goykhman, a financial analyst and Ph.D. But now, against the backdrop of a growing deficit, the state does not have the opportunity to replenish it for additional indexation of pensions.”

However, economist Andrei Loboda, director of communications at BitRiver, is sure that even in the current difficult socio-economic situation, pensioners still have reasons for optimistic expectations. “Today, the average monthly pension in Russia is about 21,000 rubles,” recalls the expert, “The amount seems modest even if the elderly are very careful spending. However, one must understand that the state has been able to significantly improve the results in the implementation of social policy in recent years. Over the past calendar year, the indexation of pensions turned out to be almost 2 percent higher than inflation. There is every reason to believe that an unexpected jump in indexation awaits the Russians here, especially since inflation has dropped sharply today.”

The state will have the money for such an important social step, even against the backdrop of a budget deficit, Loboda believes. Moreover, helping citizens brings visible results. Today, less than 10 million Russians already live below the poverty line – this is the lowest figure in the last 30 years. So, our interlocutor concludes, targeted support, primarily for non-working pensioners, has already proved to be very effective.

At the same time, he believes that the growth of pensions in Russia is a hot topic for many years. “And the state finds opportunities for prompt and consistent fulfillment of its social obligations, especially if the Russian president periodically spurs the government on this issue. After all, it is objectively clear to the whole society that the minimum decent level of old-age pension should be at a minimum level of 50 thousand rubles. We are moving towards this, we would like to do it as soon as possible!” Andrey Loboda calls.