How much does it cost to maintain the Pension Fund and why does it need more and more from the budget?

The Pension Fund of the Russian Federation
(
PFR
) is the largest organization in Russia providing socially significant public services to citizens. Founded on December 22, 1990 by Resolution of the Supreme Council of the RSFSR No. 442-1 “On the organization of the Pension Fund of the RSFSR”[2].

As a state extra-budgetary fund of the Russian Federation, the Pension Fund of the Russian Federation was created for the state management of funds of the pension system and ensuring the rights of citizens of the Russian Federation to pension provision. The budget of the Pension Fund of the Russian Federation is approved by the State Duma of the Federal Assembly of the Russian Federation in a separate law, together with the adoption of the Federal budget of the Russian Federation. The share of the Pension Fund's budget in Russia's GDP is 10.8% in terms of income and 10.2% in terms of expenses. The Pension Fund of the Russian Federation pays pensions to over 40 million pensioners[3] and social benefits to 20 million beneficiaries, and maintains personalized records of the pension rights of insured persons[4] - for over 128 million Russian citizens.

Since 2005, there has been a deficit in the pension system, which is covered by transfers from the budget. However, the deficit of the pension system is several times smaller than the deficit of the pension fund, due to the transfer of social obligations unrelated to the payment of pensions to the Pension Fund[5]. According to Nikita Krichevsky, until 2005, the Russian pension fund had a budget surplus: in 2003 - 100 billion, in 2004 - more than 66 billion rubles[6].

Pension Fund structure

The structure of the Pension Fund includes 8 Directorates in the Federal Districts of the Russian Federation, 83 Branches of the Pension Fund in the constituent entities of the Russian Federation, a branch in Baikonur (Kazakhstan), as well as about 2,500 territorial directorates in all regions of the country. The Pension Fund system employs more than 100,000 workers[7]. The highest body is the Board of the Pension Fund; the Executive Directorate of the Pension Fund is responsible for its executive functions.

In relations with policyholders, insured persons and pensioners, the territorial departments of the Pension Fund of the Russian Federation are separate legal entities[8].

Socially significant functions of the Pension Fund

Among the socially significant functions of the Russian Pension Fund[7]:

• appointment and payment of pensions;
• accounting of insurance funds received under compulsory pension insurance;
• assignment and implementation of social payments to certain categories of citizens: veterans, disabled people, disabled people due to military trauma, Heroes of the Soviet Union, Heroes of the Russian Federation, etc.;
• personalized accounting of participants in the compulsory pension insurance system;
• interaction with policyholders (employers - payers of insurance pension contributions), collection of arrears;
• issuance of certificates for receiving maternity (family) capital;
• payment of maternity capital funds;
• management of pension system funds;
• implementation of the Program of state co-financing of voluntary pension savings (56-FZ of April 30, 2008, also known as the “thousand for a thousand” program);
• since 2010 - administration of insurance funds received under compulsory pension insurance and compulsory medical insurance;
• since 2010 - the establishment of a federal social supplement to social pensions in order to bring the total income of a pensioner to the pensioner’s subsistence level.

Personalized accounting in the compulsory pension insurance system
Data on the payment by policyholders (employers) of mandatory insurance premiums for an employee, information on insurance (work) experience are reflected on the individual personal account of the insured person, which is maintained by the Pension Fund of the Russian Federation for each officially working citizen of Russia. The procedure for maintaining this personal account is regulated by Federal Law dated April 1, 1996 N 27-FZ (as amended on December 29, 2015) “On individual (personalized) accounting in the compulsory pension insurance system”[4]. Any citizen of the Russian Federation who has a SNILS can check information about the payment of mandatory insurance contributions by his employer on his individual personal account with the Pension Fund of Russia using the Internet portal “Gosuslug”[9].

PFR in numbers: statistics of the Russian pension fund for 2020

On June 13, 2020, the Russian Pension Fund published an official report on its activities for 2020 (although this is not mandatory for it). It covers both the main directions and results of the Fund’s work.

Among other things, this report provides the latest Pension Fund statistics for 2020 compared to 2020.

We present all the performance indicators of the Pension Fund in this material, since this issue is of interest to many.

Key performance indicators of the Fund

Official PFR statistics for 2020 give an idea of ​​what benefits and other payments the fund makes, what the size of the pension is in Russia and how many people the pension system serves as a whole. We present the amounts for each indicator.

How many participants are there in the pension system?

According to the latest statistics from the Pension Fund of the Russian Federation, the number of participants in the pension system is as follows:

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• insured under compulsory health insurance – 153.8 million;
• policyholders within the framework of compulsory health insurance – 9.3 million (employers – 5.3 million, self-employed policyholders – 4.0 million);

pensioners directly – 43.5 million (recipients of insurance pensions – 39.8 million, state pensions – 3.7 million, payments from pension savings – 1.1 million).

Average pension in Russia

There are also statistics from the Russian Pension Fund on the average pension amount (depending on the type):

• insurance – 13,306 rubles;
• old age insurance – 13,762 rubles;
• cumulative – 866 rubles;
• urgent payment of pension savings – 1277 rubles;
• one-time payment of pension savings – 3935 rubles;
• social pension – 8797 rubles;
• social services for disabled children and people with disabilities since childhood – 11,250 rubles;
• the living wage for a pensioner in the Russian Federation is 8,540 rubles;
• fixed payment to the insurance pension (total amount) – 4805 rubles;
• The average federal social supplement to pension is 1,938 rubles.

Matkapital

The PFR report in numbers does not ignore the maternity (family) capital program:

• the amount of maternity capital is 453,026 rubles;
• number of issued certificates for maternal capital – 8.3 million;
• families who have fully managed their maternity capital – 4.9 million.

Who is saving for retirement?

The Pension Fund also talks about pension savings in numbers. The total number of such persons is 76.7 million. Among them:

• in the state-owned management company Vnesheconombank - 42.0 million;
• in private management companies – 0.4 million;
• in non-state pension funds – 34.3 million.

Co-financing of pensions

The statistics of the Pension Fund of the Russian Federation for 2020 under the Pension Savings Co-financing Program are interesting:

• participants – 2.6 million;
• their contributions for 2020 – 5.3 billion;
• the average contribution is 8.1 thousand rubles;
• state co-financing of contributions – 5.1 billion.

Progress in raising pensions

Perhaps the most exciting part of the statistics of the Pension Fund of the Russian Federation for 2020 concerns the increase in pensions:

• indexation of insurance pensions – by 5.8%;
• indexation of state pensions – 1.5%;
• investment return on pension savings for Vnesheconombank’s expanded portfolio – 8.8%;
• investment yield of pension savings on the portfolio of government securities of Vnesheconombank - 11.2%;
• investment return on pension savings for the total investment portfolio of private management companies – 10.8%;
• indexation of social monthly cash payment (SMV) – 5.4%;
• inflation for 2020 – 2.5%;
• inflation for 2020 is 5.4%.

Social payments

With regard to social payments, the situation is as follows:

• recipients of monthly cash payments (MCB) – 15.4 million;
• recipients of additional monthly material support (DEMO) – 0.5 million;
• recipients of disability care payments – 1.9 million;
• recipients of payments for the care of disabled children – 0.5 million;
• compensation payments to northern pensioners – 0.2 million.

Fund resources

According to statistics from the Pension Fund of the Russian Federation, the Fund’s budget in terms of income is 8,319.5 billion. Receipts of insurance premiums for compulsory pension insurance are 4,481.9 billion.

In terms of expenses, the Pension Fund budget statistics are as follows:

• expenses for payment of pensions – 7167.2 billion;
• for social payments – 488.0 billion;
• expenses under the Maternity Capital Program - 311.8 billion.

Also see “Scheme of the structure of the Pension Fund of Russia as of 2018.”

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Contributions - income of the Pension Fund

See also Compulsory social insurance in Russia.
The standard rate of contributions to the Pension Fund is 22% of the organization’s payroll, while contributions are not included in the salaries of individual employees, but are taken into account by the pension fund when maintaining their accounts[10]. These contributions are divided into the insurance part and the funded part of the pension.

Until 2010, contributions to the Pension Fund were taken into account as part of the unified social tax.

From January 1, 2010, the unified social tax was abolished, and instead direct insurance contributions of employers (policyholders) to three extra-budgetary funds were established: the Pension Fund of the Russian Federation, the Federal Compulsory Medical Insurance Fund and the Social Insurance Fund. In 2010, the total volume of insurance contributions will remain at the level of the Unified Social Tax rate - 26%, of which 20% will be directed to the Pension Fund of the Russian Federation (for compulsory pension insurance). In this case, contributions will be paid from annual earnings up to 415 thousand rubles. If annual earnings exceed 415 thousand rubles, contributions in excess of 415 thousand rubles are not collected, but pension rights in excess of this amount are not formed. From 2011, the amount of total contributions will increase to 34%, of which 26% will be contributions for compulsory pension insurance. This system makes it possible to significantly increase the level of pensions in the country. For persons who are fully covered by the insurance system, the coefficient of replacement of wages with a pension with which insurance premiums were paid will be at least 40% after 30 years of paying these contributions upon the occurrence of an insured event (that is, old age, determined by the citizen reaching the age established by law - 55 years for women and 60 years for men).

Also, since 2009, citizens have the opportunity to make voluntary contributions to the funded part of their pension. The law[11] provides for two parties to co-financing a citizen’s contributions - the state (which doubles the amount to at least 2 thousand, but not more than 12 thousand rubles) and the employer (which receives a tax deduction for co-financing employee contributions up to 12 thousand rubles).

Part of the long-term pension provision mechanism for citizens of the Russian Federation is the Russian National Welfare Fund[12]. As of April 2020, according to the Russian Ministry of Finance, the total volume of the fund amounted to 4,134.27 billion rubles (73.33 billion US dollars)[13].

Before transferring funds to management companies and non-state pension funds, the Pension Fund temporarily places them in commercial banks. Thus, according to the results of 2016, he received an income from such investment in the amount of 2.97 billion rubles, which is 10.58% per annum[14].

Budget of the Pension Fund of the Russian Federation

Funds from the budget of the Pension Fund of the Russian Federation are federal property, are not included in other budgets and are not subject to withdrawal.

The budget of the Pension Fund of the Russian Federation is drawn up by the insurer for the financial year, taking into account the mandatory balancing of income and expenses of this budget.

The following amounts are separately taken into account as part of the budget of the Pension Fund of the Russian Federation:

• insurance contributions for the funded part of the labor pension;
• funds allocated for investment, payments from pension savings;
• expenses of the budget of the Pension Fund of the Russian Federation associated with the formation and investment of pension savings, maintaining a special part of individual personal accounts and payment of the funded part of the labor pension.

Mandatory pension insurance funds are stored in accounts of the Pension Fund of the Russian Federation opened in the institutions of the Central Bank.

The budget of the Pension Fund of the Russian Federation is formed through:

• insurance premiums;
• federal budget funds;
• amounts of penalties and other financial sanctions;
• income from the placement (investment) of temporarily free funds of compulsory pension insurance;
• voluntary contributions of individuals and organizations paid by them not as policyholders or insured persons;
• other sources not prohibited by the legislation of the Russian Federation.

Funds from the budget of the Pension Fund of the Russian Federation have a specific purpose and are directed to:

• payment in accordance with the legislation of the Russian Federation and international treaties of the Russian Federation of labor pensions and social benefits for the burial of deceased pensioners who were not working on the day of death, transfer of funds in an amount equivalent to the amount of pension savings accounted for in a special part of the individual personal account of the insured person to a non-state a pension fund chosen by the insured person to form the funded part of the labor pension;
• delivery of pensions paid from the budget of the Pension Fund of the Russian Federation;
• financial and logistical support for the current activities of the insurer (including the maintenance of its central and territorial bodies);
• other purposes provided for by the legislation of the Russian Federation on compulsory pension insurance.

Funds generated as a result of excess receipts of the unified social tax (contribution) in the part credited to the federal budget over expenses incurred to finance the payment of the basic part of the labor pension are credited to the budget of the Pension Fund of the Russian Federation in full. These funds are spent in the following order:

• to compensate for the lack of funds from the budget of the Pension Fund of the Russian Federation for the payment of the insurance part of the labor pension;
• for an additional increase in the basic part of the labor pension based on inflation for the next financial year.

To ensure the financial stability of the compulsory pension insurance system in the medium and long term in the event of a budget surplus of the Pension Fund of the Russian Federation, a reserve is created.

The estimated pension capital is formed from the total amount of insurance premiums and other revenues to finance the insurance part of the labor pension received for the insured person to the budget of the Pension Fund of the Russian Federation, based on individual (personalized) accounting data.

Performance indicators

How much money do they give to the fund?

The Pension Fund of the Russian Federation is a significant social institution of the country that pays insurance, funded and other types of pensions, and also issues certificates for maternity capital, implements social payments to veterans and disabled people, provides targeted assistance to pensioners and co-finances social programs of the constituent entities of the Russian Federation, and so on.

All these areas require significant financial resources. Insurance payments from the working population and the sale of the fund's own assets are not enough . As a result, one of the main sources of income is a transfer from the federal budget.