Siluanov promised to increase the income of pensioners: how realistic is this?

Experts assessed whether the rise in the dollar exchange rate and other factors were taken into account in the indexation of pensions

Next year, the average pension for Russians will be just over 23.2 thousand rubles per month. This was stated by the head of the Ministry of Finance Anton Siluanov during a speech in the Federation Council. According to him, payments will be indexed in accordance with the projected inflation rate of 7.5%. The government’s concern for pensioners is commendable, given that the Cabinet expects a budget deficit next year. However, whether this increase will cover the real level of inflation, because the ruble is weakening, gasoline is becoming more expensive and all this is reflected in the cost of products, MK found out from experts.

According to Siluanov, the total amount of state treasury expenditures on pension payments in 2024 will be almost 600 billion rubles. “Next year, pensions will be indexed to the inflation rate predicted for this year, which is 7.5%, and the average size of such a pension will be 23,244 rubles,” the head of the Ministry of Finance emphasized. It is commendable that even expecting a federal budget deficit above 1% of GDP, as Siluanov reported at the same meeting in the Federation Council, “the powers that be” found an opportunity to index the monthly income of pensioners. According to a bill previously submitted to the State Duma, in 2024 the average pension for working pensioners will be 22,605 rubles, increasing as a result of recalculation by 1,572 rubles. And the average income of non-working pension recipients will increase by 1,631 rubles and amount to 23,449 rubles.

However, how much in reality will such an increase help older compatriots cope with rising prices, given that the dollar has already traded above 100 rubles on the Moscow Exchange twice over the past month and a half, and gasoline prices continue to rise, despite “extraordinary measures”, which, according to Deputy Prime Minister Alexander Novak, has already been accepted by the government, is an open question.

According to Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences, the increase in pensions corresponds to the inflation rate projected by the government. At the moment, this indicator has not reached this value. Currently, inflation is around 5.5%, but it continues to accelerate. As a result, by the end of the year, official inflation will most likely be 7.5%. Indexation of pensions by this amount is an expected solution. The accuracy of the forecasts of the Russian authorities increases as the end of the year approaches, but it must be admitted that this time it is strictly impossible to forecast perfectly even in the fall. The government understands that inflation will rise and actually adds another 2% to the current level of price growth. We can say that even the weakened ruble/dollar exchange rate is taken into account in the projected inflation rate and indexation is carried out taking this factor into account, the economist is sure.

According to the associate professor of the department of the Chamber of Commerce and Industry of the Russian Federation “Human Resource Management” of the Russian Economic University. G.V. Plekhanov Lyudmila Ivanova-Shvets, of course, I would like this indexation to be higher, but not only ours, but also global practice is such that the indexation of payments from the state exceeds the inflation rate by a minimum amount. There are no official data on the real level of inflation, and various sources indicate that in 2023 it ranges from 11% to 22%. Then we can assume that the pension needs to be indexed at least twice as much as planned. This would be more in line with real price increases. But there are approved norms, laws according to which pensions are indexed, and the government follows them, the economist pointed out.

As Alexander Safonov, a professor at the Financial University under the Government of the Russian Federation, recalled, the current average pension is 19,322 rubles. In 2024, it is expected that its level will increase to 23,200 rubles, which means indexation by 20%. If we take into account the level of inflation this year (so far, according to the Central Bank, it remains at 5.5%), then the indexation of pensions should outpace the growth of inflation by about 13-14%. For the second year in a row, pension indexation is higher than the level of official inflation. In 2022, in the middle of the year, indexation was 10%, and from January 1 – another 4%, with annual inflation of 12.9%, the excess was 1.1%. “But we must take into account the fact that the level of personal inflation may be higher,” the expert notes. “The fact is that low-income segments of the population are forced to purchase a limited range of goods and a sharp increase in prices for a certain group of food products or goods is felt much more acutely by them.” For example, by the middle of the year, according to ROMIR, the cost of services increased by 11.3%, and the general index, for example, of prices from May 2023 to May 2022 was 14%. ROMIR, unlike Rosstat, calculates price increases based on a comparison of actual purchase receipts for the goods most in demand by the population. Therefore, 20% indexation can only close the gap from real inflation, but it is unlikely to increase purchasing power. For this to happen, the rise in prices must stop. “The ideal indexation model is an increase in pensions in accordance with the rate of salary growth and at more frequent periods: once every six months, once a quarter,” says Safonov. “But this approach requires changes in legislation and clearer forecasts of revenues and expenses of the budget system.”

According to the owner of the TOBU Accounting House company, Ekaterina Zelenskaya, it would be fair to raise pensions by at least 25% in order to “beat off” price increases in the first half of this year and by the same amount at the beginning of next year to even out the balance of consumption, but such a scenario is unlikely and because of the federal budget deficit.