What new awaits Russians from October 1: salaries, mortgages, citizenship

Increasing salaries for security forces and pensions for military personnel

From October 1, 2023, salaries of military and security officials will increase by 10.5%. According to the decree of the Government of the Russian Federation, the salary will be increased by 1.105 times for contract military personnel and conscripts. The increase will also affect official salaries and salaries for special ranks for persons who serve in the Russian Guard, the Ministry of Internal Affairs, the Federal Penitentiary Service, the Federal Bailiff Service, the Federal Fire Service, the Federal Customs Service, as well as the salaries of the management of the State Courier Communications Service.

Also, from October 1, 2023, military pensions will increase, after which the average pension through the Ministry of Defense will be almost 42 thousand rubles.

Andrey Loboda, director of communications at BitRiver, comments:

“If we talk about employees of law enforcement agencies, their salaries will be increased by 1,105 times, or 10.5%, which is almost double the current annual inflation rates. The state is now focusing on providing for law enforcement officers and their families, which is very correct, given the geopolitical situation. It is logical to assume that the authorities will continue to pay increased attention to this category of citizens, offering assistance and new benefits. In particular, from October 1, the average pension through the Ministry of Defense of the Russian Federation will already be 42 thousand rubles. This is almost twice the average old-age insurance pension in the country.”

Indexation of salaries for government employees

From October 1, the salaries of government employees who are not civil servants will increase: they will increase by 5.5%. Among those who will be indexed are accountants, security guards, cashiers, drivers, stenographers, commandants and freight forwarders.

The salaries of Russian Railways employees, including those involved in railway maintenance, are also being increased. And workers who work in institutions controlled by Russian Railways, for example, medical and educational ones.

Ivan Samoilenko, managing partner of B&C Agency, comments:

“In our country, about 5 million citizens are employed in government agencies, their salaries are regularly indexed at the expense of the state budget. This is part of the state’s work to increase the average standard of living in the country. The size of the increase corresponds to inflation in Russia over the past year – its value is 5.8% for the period from August last year to the current moment. In any case, such measures as part of the fight against inflation will be a good help for these categories of government employees, who are clearly not among the highest paid.”

Introduction of stricter lending limits

The Bank of Russia has established new macroprudential limits (MPL) for unsecured loans and borrowings for the fourth quarter of 2023 (starts from October 1). The decision was made in order to limit the growth of debt burden of citizens by disincentivizing lending to borrowers with a high debt load. The country’s annual debt growth rate is 13.3% as of August 1, 2023.

Mark Goikhman, analyst at the Capital Skills Financial Academy, comments:

“The Bank of Russia is concerned about the increase in people’s debt load. It can create risks both for the borrowers themselves and for banks. Non-repayment of borrowings is negative for both. The Central Bank of the Russian Federation notes with alarm the growth in lending to borrowers with a high “debt burden ratio” (DLR). This is the share of all loan payments in the total income of the borrower. But according to the Central Bank, in the second quarter, 64% of loans went to those who spent more than half of their income on servicing them. Tightening regulatory requirements will make it more difficult for those with insufficient income to obtain loans. Together with the increase in the Central Bank’s key rate to 13%, this will reduce the demand for loans and slow down the increase in their total amounts in the economy. As a result, risks in the banking system will become relatively lower. But people’s ability to make purchases will also be reduced. And this, in turn, restrains economic growth.”

A mortgage with a low down payment will become less profitable

From October 1, it should become less profitable for banks to issue mortgages with a low down payment. New instructions from the Central Bank on macroprudential buffers to risk ratios come into force. The premiums will depend on the size of the down payment (that is, the ratio of the loan size to the value of the collateral) and the expected debt load of the borrower. The highest premiums are established for loans for housing under construction: for example, for such loans with a down payment of up to 10%, the calculated premium will be 900%.

Anastasia Chumak, a specialist at the Intercession law firm, comments:

“In theory, this will not have a significant impact on the market, since the average down payment on a mortgage in Russia in August 2023 was 30.5% of the value of real estate. But mortgages will become unavailable to those who cannot find 20% for a down payment. Based on statistics, this is 2-3% of the total number of borrowers. Now at least a third of the total number of loans issued by banks are made up of preferential programs: family mortgages, rural mortgages, IT mortgages, and so on. This measure will primarily hit those who planned to take out a mortgage for a secondary home. The main factors influencing demand now are the Central Bank rate and preferential programs. If the former increases and the latter is canceled, we will observe a significant cooling of the market.”

Inexperienced investors will be restricted from trading in securities

From October 1, unqualified investors will be limited to trading in a number of foreign securities. As follows from the Moscow Exchange report, we are talking about almost 700 securities. This is another restriction by the Central Bank in order to protect the money of inexperienced investors. Also, from the beginning of 2023, there is a complete ban on the purchase of securities from unfriendly countries by non-qualifiers. Unqualified investors can purchase securities of friendly countries that are not accounted for through the infrastructure of unfriendly countries, as well as foreign securities whose issuers operate primarily in Russia and the Eurasian Economic Union (EAEU).

Natalya Milchakova, leading analyst at Freedom Finance Global, comments:

“From the position of the Central Bank of the Russian Federation, such a decision can be considered as necessary in order to prevent very possible losses of unqualified investors from investing in foreign securities in cases where these securities are stuck in foreign depositories. The risks in the stock market are always much higher than the risk of keeping money in a bank deposit, and “non-qualifiers” know this. Now the opportunities for them to earn a good profit or at least receive dividends from foreign companies are sharply narrowed. In addition, it is likely that brokers will have to increase their staff of account managers precisely because they will have to spend more time explaining the consequences of the regulator’s decision.”

It will be easier for banks to open mobile offices

From October 1, the Central Bank of the Russian Federation is simplifying the procedure for banks to open mobile cash transactions points and changing their names from divisions to “mobile office”. The changes will allow banks to expand their ability to provide banking services in remote and sparsely populated areas, in disaster and emergency zones. The mobile office will be able to additionally carry out lending operations, transfers on accounts without opening a bank account, provide cash services in full, and provide collection services to companies.

Natalya Milchakova comments:

“Residents of many remote towns, villages and small towns were most likely waiting for such a decision. They need mobile bank offices, because in order to withdraw cash from an ATM, that is, to carry out a routine operation for residents of large cities, they have to go to the regional center, and some even fly by helicopter. Mobile offices can certainly be used in larger cities if their residents were affected by a flood, earthquake or other natural disaster, and regular bank offices were closed for this reason.”

Sandwiches will be subject to increased taxes

From October 1, the Federal Tax Service will increase the value added tax (VAT) on sandwiches, including hamburgers, cheeseburgers and other similar products, from 10% to 20%.

Ivan Samoilenko comments:

“The fact is that previously hamburgers, cheeseburgers and similar products did not have a separate code in the classifier. Sellers of these goods independently classified them as “bakery products with a short shelf life,” for which the VAT rate is 10%. Now the Federal Tax Service is making clarifications to the All-Russian Classifier of Products by Type of Economic Activity (OKPD 2). Hamburgers and similar products will now be subject to VAT at 20%. Considering that in the first half of 2023 these sandwiches have already risen in price by an average of 10%, in the future the price may rise by another 5% at least.”

And:

Beer labeling will become mandatory. From October 1, mandatory digital labeling of beer and beer drinks packaged in glass or PET containers will begin.

Deserters and extremists will be deprived of Russian citizenship. On October 26, 2023, the new law “On Citizenship of the Russian Federation” will come into force. It specifies new reasons for deprivation of citizenship. Russian citizenship can be lost for desertion, calls for extremism and discrediting the Armed Forces of the Russian Federation.

New fines for draft evaders and their employers. From October 1, citizens who fail to appear at the military registration and enlistment office on a summons without a good reason will receive a fine of up to 30 thousand rubles. Also, employers will also be responsible for the fact that employees were not informed about the need to report to the military registration and enlistment office: officials will receive a fine of 40 to 50 thousand rubles, and legal entities – from 350 to 400 thousand rubles.