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New pension reform is inevitable

Новая пенсионная реформа неизбежна

Despite promises of power, increasing the age of retirement only delayed the problem, the gap between the salaries and benefits of the FIU will continue to grow.

In Russia coming much more radical pension reform than increasing the age of retirement. Otherwise, to survive on the monthly payments from the pension Fund will be much more difficult than it is now. What is the reason and how to find the way out of the situation, discussed at the Gaidar forum in 2020.

In the perception of the population, even after the reform, 2018 pensions remained low both in absolute terms and in relation to previous earnings, said the Deputy Director of the Institute for social analysis and forecasting Ranhigs Yuri Gorlin. After the release of a pension a person receives less than 40% of their income, and a lot less relevant in the labour market wages. In addition, the size of payments from the pension Fund not varies greatly depending on previous wages, seniority and other things. “A neighbor was working less than I, received a penny, and the pension we have now almost the same” — talk people.

“Our calculations show that, assuming even a small, but stable economic growth of 1.5%, as now, to index pensions in line with inflation is not a problem. The problem is that the ratio of pensions and salaries will continue to decline. And at some point, it might be critical,” said Gorlin. And the more economic growth the more is the gap between pensions and salaries.

One more, pure Russian problem: we have quite a lot of workers with such low wages that even with forty years of experience they will not earn a pension exceeding the poverty line. That is, the government will not be able to opt out of pension payments. This means the system now is not fulfilling its main function — protection against poverty in old age. If nothing changes, will only get worse.

“If we don’t raise the retirement age in 2018, by 2050, one pensioner had to be 0.85 and the employee who pays contributions to the pension Fund. Pension reform helped to limit the decline to 0.99. But this forecast does not account for the rise of nonstandard forms of employment and expanding informal sector,” says Gorlin.b

According to various estimates, up to 35% of wages paid in envelopes, bypassing insurance premiums. In addition, officials introduced a special regime for self-employed and legally freed people from paying contributions. “Perhaps, to solve the problem would cost to charge insurance premiums not only income but also expenses in excess of official earnings. Digital technologies allow to do it. But in this case, Orwell would seem to us children’s tale,” said Gorlin.

According to experts, the aging of the population objectively requires a revision of the social contract. “Raising the retirement age slightly improved the situation, but you need to make further decisions, and they likely will be accepted. First and foremost is the increasing requirements for length. Today is enough to fulfill 11 years old, will be 15 years, but this is still not enough to balance the system,” he said. In addition, we must reform the system of early retirement, to change the rate of premiums.

There are different points of view about what should be the pension system of the future. “It is believed that pension insurance in the horizon of 50 years should be transformed into benefits need to be paid to those who stopped working due to old age or for some other reasons. Another concept, and I think it is more realistic, is that the pension system in the foreseeable future will maintain the insurance character, based on the principles of solidarity of generations”, — said the expert. Most importantly, according to Gorlin to the coming change was known in advance for many years to come.

That in the foreseeable future, a significant role will play the accumulative pension system, yet seriously difficult to speak. According to Gorlin, still yield NPF was almost twice lower than inflation. While managers of pension savings received as a reward, almost a third of investment income.

With what prospects of a guaranteed pension product is not much, agree the Deputy Director of the HSE Institute for social policy Oksana Sinyavskaya. “From the point of view of incomes and their dynamics over the past three years, we can say that almost a third of workers could potentially participate in the storage system. This is real I already have savings and are willing to invest in the Fund only 2.5-6% of employed workers. It’s not the figures on which the dream, the Central Bank and the Finance Ministry,” said Sinyavskaya.

According to her, for 15% of the employees rate of substitution is so small that makes the part even in the state pension system uninteresting and meaningless, and they predicted a sharp drop in living standards, provided the termination of employment. “Moreover, the research of our Institute show that over the last decade there has been a trend of increasing “sticky floor”. That is — to get out of the situation of low skills and low income are more difficult,” she said.

As regards informal employment, this, according to Sinyavsky, not only the selection of employees. “The research on the informal economy that we have today show that the reason for the expansion of this segment of the complex is largely associated with features of national structure of Russia’s economy. If we look at how employment has varied over the past decades, we see that the observed growth was mainly due to the informal sector. The level of employment in the formal sector, however, declined,” said she.

In conditions where self-employed and employees with salaries “in envelopes” are increasing, according to Sinyavsky, the government may have to reduce the coverage of the insurance pension system. “But in this case we do not know what people live like in the early retirement years when they can still work, and after 75 years. Perhaps in the long term should think about introducing something like a basic income in old age,” — said Sinyavskaya.

That the new pension reform is necessary and inevitable, all the panelists were unanimous. “We live at a critical juncture when there is a search brand new paradigm of development of the pension systems — and we, and all over the world. But our main Agency which should be responsible for pensions, the Ministry of labour, I think, conceptually not ready for this”, — said the head of the Center for legal support of socio-economic reforms of the Institute of legislation and comparative law under the government of the Russian Federation Yury Voronin.

According to experts, now needs to focus on solidarity insurance system. For the vast majority of the population in the coming decades it will be basic. “We have to be clear: we preserve the old social contract or the proposed new one? The issue is not the choice of insurance or cumulative model. They are different knives, which cut the same cake generated from wages. The main problem of the pension system is not aging. The problem is that we have a payroll stopped growing at the pace that it grew during all of the 20th century — more than 5%, now less than 1.5%. That’s the reason of the crisis of the system. Changing its shape, we will not solve the problem. We should first determine the question of the sources of content,” — said Voronin. Instead, the government in the period from 2005 to 2012, reduces the rate of insurance contributions to 12%, thereby further increasing dependence of the pension system from the budget transfers.

“If the salary we have shrinks, you need to look in the direction of tax the robots, aggregators. For the system to be self-sustaining and balanced, we need to find new sources,” — said Voronin.

While self-employed it is suggested to allocate in a separate category. “We need to stop subsidizing their pensions from a common joint system. We need to offer them another. It seems to me that for them a more organic, individually-funded,” — said the expert.

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