One of the indicators characterizing the effectiveness of the state's social policy is the level of pension provision for citizens. Currently, much attention is paid to the issues of reforming the pension system in the Russian Federation.
Types of pension systems
The pension system is a set of legal, economic, organizational institutions and norms that aim, under certain conditions, to provide financially to citizens (usually the elderly) by paying them a pension.
In world practice, there are two types of pension systems: pay-as-you-go and funded. The pay-as-you-go pension model is based on the principle of social justice. Under this model, pension payments are financed from current budget revenues, there is a direct dependence on demographic factors - the larger the number of the younger generation, the more the population of retirement age will be provided with the pension payments due to it. The accumulative model is characterized by the process of accumulating a certain part of funds in the reserve accounts of future pensioners, the demographic factor does not directly affect the amount of payments, they depend only on the future recipient of the pension.
Until 2002, there was a pay-as-you-go model of pension provision in Russia, the foundations of which were laid in the USSR, where the state pension was guaranteed to all citizens, thanks to many favorable factors, including demographic ones. At the beginning of the 21st century, the pension systems of many developed countries experienced a deficit in current payments to ensure pension payments. The reason for this was the deterioration of the demographic situation in connection with the decline in the birth rate. And Russia is no exception.
In 2002, a pension reform began in the Russian Federation aimed at creating a mixed pension system that combined elements of the insurance system and a funded system: personalized accounting was introduced and the funded part of pension savings was allocated. That is, contributions for compulsory pension insurance were divided into two parts - insurance and funded. The insurance part was sent to the "common pot" for the payment of pensions to real pensioners, and the funded part was accumulated on the individual account of the insured person. This innovation did not affect everyone. The funded part of the labor pension began to form among men born in 1953 and younger and among women born in 1957 and younger. The amount of insurance contributions for the funded part of the labor pension ranged at different times from 2 to 6% of their wages. For example, since 2010, 16% of the salary of each employee went to the budget of the Pension Fund of Russia, and then to payments to current pensioners. And 6% went to the individual retirement account of the insured person. These savings were formed up to 2013. Due to the difficult situation in the Pension Fund of the Russian Federation, the funded part of pensions has been frozen since 2014 (until the end of 2023). Currently, contributions to the Pension Fund do not go to the individual savings accounts of working Russians, but go to pay pensions to current retirees. That is, in 2014 there was a return to the pay-as-you-go pension system.
Another step towards the creation of a funded pension system was the State Program for Co-financing of Pension Savings, which began operating on October 1, 2008. For ten years, Russians could pay contributions in the amount of 2,000 to 12,000 rubles a year, which the state doubled. The source of public funds was the National Welfare Fund. Despite the fact that a moratorium was introduced on the main contributions to the funded component of compulsory pension insurance from 2014, it was possible to join the co-financing program until the end of 2014, and pay the first installment to obtain the right to double contributions until the end of 2015. Thus, the last funds from the state will go to the accounts of the program participants in 2026. The maximum number of real participants in the program was recorded in 2013 and amounted to 1.8 million people. Then the state allocated 12.4 billion rubles for contributions.
The deterioration of the situation in the sphere of the functioning of the pension system of the Russian Federation in recent years has become more and more noticeable. Every year the growth rate of the population of retirement age is more and more higher than the growth rate of the population of Russia. This ratio leads to a constant increase in the burden on the population of the country. The share of pensioners in the total population rose to 31%. This entails an increase in the pension burden for budgetary indicators, an increase in the amount of pension provision, and, as a consequence, an increase in budget expenditures of the Pension Fund of Russia.
In 2020, there were 42,729 thousand pensioners in Russia for 72,323.6 thousand of the able-bodied population, that is, more than half of the total population (57.3%). At present, there are an average of 1.53 workers for every pensioner. Moreover, since 2013, there has been a gradual reduction in this ratio: in 2013, there were 1.69 employees for each pensioner, in 2014 - 1.68, in 2015 - 1.65, in 2016-2017 - 1. , 60, in 2018 -1.57, in 2019 - 1.55. In the near future, the number of pensioners in comparison with the able-bodied population will increase, and the ratio of able-bodied workers and pensioners may be 1: 1 by 2022, i.e. every able-bodied citizen will have to guarantee the provision of one pensioner. These negative trends lead to the need for the earliest possible introduction of the elements of the funded pension system.
On January 1, 2019, a new stage of the pension reform began in the Russian Federation, associated with an increase in the age that gives Russians the right to retire. According to some analysts, the positive components of this reform, namely the distribution over time of incoming contributions to the compulsory pension insurance system in order to ensure the possibility of paying pensions, may come to naught by 2050 if the demographic situation in the country does not improve significantly. And the government will once again face a choice: to increase the retirement age or the amount of insurance contributions that go to the Pension Fund.
The modern pension system in the Russian Federation consists of three elements:
1. Compulsory pension insurance is a part of the pension system that provides labor pensions to citizens insured under the compulsory pension insurance system through compulsory insurance payments.
2. State pension provision is a part of the pension system that provides state pensions at the expense of the federal budget in order to compensate for lost income to those categories of citizens who are not subject to compulsory pension insurance and do not belong to the category of insured persons.
3. Non-state pension provision and non-state pension insurance - a part of the pension system, which provides, at the expense of voluntary savings contributions of citizens, the payment of non-state pensions.
The most significant are the first two elements, the role of the third is low.
At present, options for enhancing the role of non-state pension provision are being actively discussed in order to balance the pension system and reduce the burden on the federal budget, and reduce the costs of the National State Fund.
After the introduction of a moratorium on the formation of pension savings in 2014, the Ministry of Finance and the Central Bank presented a number of options for replacing the compulsory pension insurance system. The system of individual pension capital (IPC) assumed, in particular, the quasi-voluntary nature of the formation of pension funds by citizens within the framework of non-state pension insurance. In 2019, it was replaced by a Guaranteed Pension Plan (GSP). It already assumed a completely voluntary nature of contributions from the participants in the system. In the pension system, the SPP was supposed to become a standardized plan within the framework of non-state pension insurance, providing tax incentives for both its participants and employers. The option of co-financing contributions of citizens from the state at the initial stages was also considered.
According to experts, the institution of funded pensions may be dismantled by law over the next three years. The issues of the use by citizens of the funds that were formed in savings accounts until 2014 are being studied. The Central Bank proposed introducing a third type of individual investment accounts (IIA), as a kind of alternative to savings for a long time, which has a serious tax incentive in the form of a tax deduction. For a new type of IIA, the minimum period that gives the right to receive a tax deduction is ten years. The tax deduction for personal income tax can be issued through the employer for funds that will be monthly deposited on the IIS. Transfers will be limited to 6% of the income. It will be possible to receive a 13% deduction from self-deposited funds - the amount from which it will be calculated cannot exceed 120,000 rubles per year. A deduction from the income received through IIA of the third type can be obtained if the funds from the account are spent in a targeted way - in accordance with the priority national goals and projects.
Currently, an alternative to a guaranteed pension plan is being considered - voluntary pension contributions with incentive support from the state. In addition, there are many new ideas on the market for transforming the funded component of compulsory pension insurance. Variants of both abandoning compulsory pension insurance and the possibility of reforming the funded component of compulsory pension insurance are discussed.
The need to reform the pension system is beyond doubt. For several years, the discussion has been going on around the pension product, which should replace compulsory pension insurance in a modern format. But any pension issue is a socially sensitive issue. Consequently, the rapid implementation of the outlined plans is impossible without a deep study of all related issues, an assessment of the impact of the proposed changes on the state of all participants in pension relations and a large-scale public discussion.
For cit.: Baysarov, A. (2020). Concept, types and development of the pension system. The Real Science, URL: https://s-nawuka.nethouse.me/articles/pension-system-concept