The indexation of pensions for those working from January 1 turned out to be a big trick

Questions about indexation for non-working pensioners began to arise back in October, when the Ministry of Labor announced that in 2023 it would be increased by the same 4.8%. With an annual inflation forecast of 12.4% in 2022, it turned out that older people would be charged almost two and a half times less than the level of inflation itself. Where’s the justice?!

But the authorities immediately explained that this alarm was false. In its comments, the Ministry of Labor put everything on the shelves: from June 1, 2022, payments to pensioners have already been indexed, so to speak, in excess of the plan – and not by some 5-6, but by as much as 10%.

Well, and so, these percentages, on which another 4.8% are added from January 1, as a result, give more than 15%, which significantly exceed the level of price growth predicted at that time.

It would seem, what more could you want? But not everything is so simple…

Sly numbers

Both some experts and many recipients of pensions see slyness on the part of the authorities behind these figures. The June indexation was carried out at a time when the annual inflation in the country was approaching 18%, and then the authorities explained to the old people with a “blue eye” that it was this crazy rise in prices that happened in the spring that they were compensating for with their unscheduled payments. And now it turns out that this was not a compensation for past inflation, but an indexation of the future one, which had run up by the end of 2022…

We agree that there is some confusion here. We are used to the fact that from the beginning of the year, non-working pensioners are subject to planned indexation in full for the previous year. Such is our tradition. That is, many old people believed (and not without reason) that in January 2023 the government would raise their financial support by the same 12.4%. And now it turns out that unscheduled indexing has suddenly become planned, simply ahead of the events, so to speak.

According to some pensioners, the increase in pensions in the summer covered the expenses that they incurred before June 1 and subsequently until the end of the year. “We ate them a long time ago,” one of the disgruntled veterans wrote in MK. “And now what we have already eaten, we have to eat again during 2023?”

So can the indexation for 2022 be considered fair? Is not some interest due to the unemployed?

PhD in Economics, Financial Analyst Mikhail Belyaev I am sure that the state has fully fulfilled its duty to non-working pensioners.

– You can interpret the payments made as you like, – he believes. – Regardless of whether the indexation was planned or unscheduled, our pensioners have received and continue to receive money in an increased amount. It was not a one-time payment, as in a pandemic of 5 thousand rubles, but a permanent one.

The funds will be credited to their account throughout 2023. Every month, non-stop. After a sharp jump in inflation in March, the state found an opportunity to take into account the situation and increased pensions by 10%. And since January of this year, it has added another 4.8%.

To the question of who overtakes whom – inflation indexation or vice versa, the economist replies that indexation in any case greatly supports the elderly. Although, of course, everyone wants pensions to grow stronger.

– If you remember the USSR, then the once appointed pension was not increased or revised there. As appointed, say, 60 rubles a month, so they died with them. And now payments are indexed in accordance with official inflation, – adds the economist.

At the same time, he does not exclude that next year, somewhere in the middle, another unscheduled indexation will take place. It all depends on the level of inflation at that time. Which, according to Belyaev, will be high in 2023: hardly less than 10%.

Serious prerequisites for a new rise in prices are already visible today: this is an outpacing increase in housing and communal services tariffs from December 1 (in reality, people will feel an increase when they receive payments in January), and a rapid depreciation of the ruble, which lost about 20% against the dollar in the last month of 2022 and Euro.

And in the midst of winter, vegetables and fruits will probably begin to rise sharply, following the example of last year …

As a result, by the spring inflation is again in danger of accelerating to record levels, and then the authorities will face the question of a new indexation of pensions. Another question is that this will not be so easy to do: the current budget, according to the forecasts of the Ministry of Finance, will be executed with a deficit (unlike last year’s surplus), and there will definitely not be extra money in it …

Catch up or preempt?

In 2018, at the same time as raising the retirement age, a schedule for the annual indexation of pensions until 2024 inclusive was approved by law in Russia. With the expectation that the pensions of non-working Russians grow by an average of 1,000 rubles every year. And by 2024 they averaged 20 thousand.

However, due to high inflation in 2022, plans have changed.

We look at the same “calendar”. From 2018 to 2021 inclusive, pensions were indexed by 3.7%, 7.05%, 6.6% and 6.3%, respectively. From January 1, 2022, indexation for the unemployed amounted to 8.6%. But, as we have already said, due to the active growth of inflation, in June it was increased by another 10%.

This is where the question arises, which does not give rest to pensioners. What was it? Catch-up indexing for 2022 because prices have unintentionally “freaked out”? Or, on the contrary, proactive, with the expectation, so to speak, for tomorrow, that is, for 2023?

Many older Russians believe that the 10% summer increase is compensation for their financial suffering between January and June 2022. Prices have soared and do not promise to return. That is, the summer indexation in 2022 was allegedly in pursuit of the January index of 8.6%.

If so, then from 2023 everything needs to be started anew, indexed from January not lower than the annual inflation rate for the whole of 2022 – that is, by 12.4% (so far this is a forecast figure, not the final one). Then, in their opinion, everything falls into place and is carried out according to the law.

But the trade unionist former Deputy Minister of Labor of the Russian Federation Pavel Kudyukin in principle, casts doubt on the official figure by which the government considers indexation for pensioners.

– There is a general inflation, but there is a group of goods that concerns pensioners the most, – he explains. – These are foodstuffs and medicines, for which the price increase is significantly higher than the average inflation rate. Our indexing does not take into account such a moment, although it is very significant.

According to the former deputy minister, indexation lags behind real price growth, public sector employees and pensioners lose out on this. In addition, Russia does not adhere to the recommendations of the International Labor Organization that the pension should be at least 40% of the average salary. In our country, it does not even reach 30%. That is, the average Russian worker, having retired, immediately loses more than two-thirds of his income. If the ILO standard were observed, pensions would be at least one and a half times higher.

– The insurance pension assumes that deductions are made from the employee’s salary, which insure his income for the period of disability due to age, – he explains. – These are conditional savings, since they are immediately paid to current pensioners. Therefore, the size of the pension depends on the salary. But, as a rule, some redistribution subsequently takes place in favor of those who had a low salary. This is a normal practice, since income should ensure the “reproduction of life.”

The elderly have their own inflation

Meanwhile, according to the Ministry of Labor and the Ministry of Health, Russian pensioners spend 37% of their monthly income on food, 30% on housing and utilities, and 22% on medicines. The remaining 11% goes to the “unforeseen expenses” with which our lives are rich.

This statistic shows how arbitrary at the household level data on general inflation, but which the authorities are guided by. And it becomes clear why people for the most part do not trust this official statistics.

In 2021, inflation was 8.6%. But this is on average. As Nikita Khrushchev once said, “one ate a chicken at night, and the other went to bed hungry. And on average they ate half a chicken.” So here. For a person who went shopping in 2021, is it hard to believe the figure of 8.6%, if only for vegetables the rise in price at times was 25-30%?

No, no one accuses Rosstat of dishonesty. Most likely, the department considers everything exactly – to the penny. But not the everyday goods and services that the elderly use. It has a completely different scale: more than 700 different products – from daily bread to foreign tour packages. And in the list of hundreds of products, there will always be those that significantly reduce overall inflation. And in the end, Rosstat will quite legitimately present us, like a cherry on a cake, with a relatively harmless 6 or 8 percent per year.

So maybe it’s time to consider separate inflation for pensioners. Based on their consumer basket, and then index the monthly payment to the elderly by this figure? We asked the chief researcher about this. Institute of Economics of the Russian Academy of Sciences, Doctor of Economics Igor Nikolaev.

“Veterans don’t just spend money on food,” he says. – Buy non-food items, use various services. Albeit not to the same extent as other categories of the population. However, these three components take into account the overall increase in prices.

– In recent years, food inflation in the country rolls over. For example, in January-November 2022, it amounted to almost 15.5%, which clearly overlaps the indexation of pensions, even if taking into account the June one. Maybe take the rise in food prices as a basis?

– Of course, the structure of consumption among pensioners is changing, they spend more on food. You can try to make a methodology for pensioners, older people, allowing them to calculate a separate inflation for them and index it. But this is already a matter of the future, and not of the indexation that will happen immediately after January 1, 2023…