The future of funded pensions has been determined: there are more recipients, the amounts are ridiculous

Expert Kudyukin: “Constantly changing the rules undermines the population’s trust in the system”

Almost 210 thousand Russians will be able to receive a funded pension next year, which is almost twice as many as in 2023. The growth is explained by an increase in the number of citizens reaching the age of payment: 55 years for women, 60 years for men. Meanwhile, against the backdrop of tens of millions of recipients of old-age insurance pensions, this is a drop in the bucket, and the payments they will receive are meager. Experts state: the state has failed to create an effective system of funded pensions, which would be a significant help for older Russians.

As follows from the explanatory note to the draft budget of the Social Fund of Russia (SFR) for the next three years, by 2025, 286 thousand citizens will receive payments, and by 2026 – already 362 thousand. That is, growth will continue. At the same time, the planned average size of the funded pension (in fact, this is an addition to the basic payment – insurance) in 2024 will be 1,605 rubles, in 2025 – 1,898, in 2026 – 2,142 rubles. The Ministry of Labor recalled that the formation of funded pensions began in 2002 for citizens born in 1967 and younger, as well as those for whom the employer made additional contributions in 2002-2013.

It is valuable that the state does not abandon its obligations to citizens to pay the funded element of pensions, despite the fact that this element itself has been frozen for ten years. The SFR’s expenses for payments are planned in the amount of 4 billion rubles in 2024, 6.5 billion in 2025, and 9.3 billion in 2026, the explanatory note says. Against the background of 10 trillion for recipients of insurance pensions (there are over 30 million people in the country), these amounts look like mere trifle.

Let us remind you that in Russia there are three types of pensions – insurance, state and funded. The first is assigned to all citizens due to old age; for it you need to have work experience (they are also issued for disability and loss of a breadwinner). The second is intended for special categories, for example, military personnel, astronauts, WWII participants, as well as those who do not have insurance payments. A funded pension is a monthly and lifetime payment of savings generated from employer insurance contributions (in the amount of 6% of 22% of salary) and income from their investment. It is issued only to those for whom the company has transferred part of the funds to individual savings accounts. Management is carried out by non-state pension funds (NPFs) or SFRs.

From 2014 to 2025, there is a moratorium on contributions to a funded pension (more often called a “freeze”), that is, the employer can no longer transfer part of the funds to the employee’s savings account. Today all the money goes to current insurance payments. The amount of a funded pension can be calculated using a special formula: the amount of pension savings in the account is divided by 264 months – this is the so-called “survival age” approved by law.

“The fact that the number of recipients of funded pensions is growing is no one’s merit except the great god Chronos (in ancient Greek mythology, the god of time – “MK”),” jokes former Deputy Minister of Labor, member of the Council of the Confederation of Labor of Russia Pavel Kudyukin. – At the same time, the amounts of payments are ridiculous. The mechanism of funded pensions itself was launched almost in pilot mode at one time, but as a result the state failed to significantly increase pension capital. And there are no tools: non-state pension funds had difficulty even fighting off inflation. Accordingly, the experiment failed. And I consider the decision to “freeze” itself to be dishonest, although formally it was aimed at reducing the deficit of the Pension (now Social – “MK”) Fund, which lacked current revenues from the insurance part. This comes back to haunt us when citizens of the appropriate ages begin to retire; they are clearly missing out on something. In general, constant changes in rules undermine public confidence in the pension system.”

According to Alexei Zubets, a professor at the Financial University under the Government of the Russian Federation, in Russia there are in fact no state funded pensions. Today, this mechanism in some form operates only within the walls of non-state pension funds and insurance companies. But this is a completely different, alternative story, pure commerce, not connected at all with the decisions of the authorities. The vast majority of citizens thinking about their upcoming retirement do not seriously consider pension programs with state participation as financial help. “The end result is some pennies, which is nothing to talk about,” says the expert. “People usually save for old age in the form of cash (at the same time they prefer to keep money at home, “under the pillow”), or invest in real estate.