How was the funded pension formed?
Since 2002, people born under 1967 have the opportunity to create their future income for old age.
They were formed as follows:
- 22% - total contributions paid by the employer;
- 16% — deductions for the insurance part;
- 6% - deductions for the funded part.
It was assumed that the six percent deductions were the citizen’s personal funds, which he could dispose of at his own discretion.
Why was the funded pension frozen?
The first timid bell, signaling the start of freezing the funded part of the pension, sounded in 2014.
The measure was positioned as temporary, designed to reverse the current difficult financial situation - 6% of the transferred funds were withdrawn from the circulation of the Pension Fund and transferred to the personal personal accounts of citizens in a non-state pension fund or management company. This led to a budget deficit for the Russian Pension Fund, which was covered from federal sources. The freezing of the funded part of the pension meant that the prolonged funds of future pensioners solve the problem of insurance payments for current ones. However, the temporary measure was repeated year after year.
The decisions were supported by legislative acts:
- 2014 - Federal Law No. 351 of December 4, 2013;
- 2015 - Federal Law No. 410 dated December 1, 2014;
- 2016 - Federal Law No. 373 dated December 14, 2015;
- 2017-2019 — Federal Law No. 447 dated December 19, 2016.
Download for viewing and printing:
Federal Law No. 351-FZ dated October 3, 2018 “On amendments to Articles 46 and 146 of the Budget Code of the Russian Federation in terms of expanding the list of budget revenues of the Pension Fund of the Russian Federation”
Federal Law of December 28, 2013 No. 410-FZ “On Non-State Pension Funds”
Federal Law of December 14, 2015 No. 373-FZ “On Amendments to Article 33.3 of the Federal Law “On Compulsory Pension Insurance in the Russian Federation” and Federal Law “On Amendments to Certain Legislative Acts of the Russian Federation on Compulsory Pension Insurance Regarding the Right of Choice” pension options for insured persons"
Federal Law of December 19, 2016 No. 447-FZ “On Amendments to Article 33.3 of the Federal Law “On Compulsory Pension Insurance in the Russian Federation” and Article 6.1 of the Federal Law “On Amendments to Certain Legislative Acts of the Russian Federation on Compulsory Pension Insurance in Particulars the right of insured persons to choose a pension option"
Terms of the law on “frozen” money
At the beginning of 2020, based on amendments to Federal Law No. 413 of December 2020, it was decided to extend the freeze on the funded part of the pension until 2020.
The reform carried out last year seemed to be intended to stabilize the Pension Fund's budget. But all calculations showed that the budget deficit would continue, and therefore, at the end of November 2020, President Putin signed a decree extending the freezing of funded pensions until 2021. Download for viewing and printing: Federal Law of December 20, 2017 No. 413-FZ “On amendments to Article 33.3 of the Federal Law “On Compulsory Pension Insurance in the Russian Federation” and Article 6.1 of the Federal Law “On Amendments to Certain Legislative Acts of the Russian Federation on Compulsory Pension Insurance Issues Regarding the Right of Insured Persons to Choose a Pension Security Option”
Freezing the funded portion of pensions: simple explanations
Moscow, December 17, 2019, 14:34 — REGNUM The freezing of the funded part of pensions is primarily due to the fact that the funds collected by the Pension Fund of the Russian Federation (PFR) are sorely insufficient to put them aside for savings. All the money goes to pay the insurance part of pensions to current pensioners, Anatoly Vakulenko , an analyst at FINAM Group of Companies REGNUM , commenting on the freezing of the funded part of pensions once again.
“If the situation does not improve, then those who work now, providing pensions for pensioners, but without forming their own pension savings, when they themselves retire, will be forced to hope that those who will work then, that is, the current younger generation, will be able to feed them .
It is worth noting that recently the Pension Fund and the government have been generating a huge number of initiatives aimed at improving the situation with pension savings. In particular, on December 14, the Ministry of Finance decided to eliminate the possibility of cashing out frozen pensions.
On December 9, the Pension Fund named the condition for suspending pension payments. It may be suspended if the citizen has not confirmed the fact of registration at the place of receipt of funds. On December 4, the Pension Fund announced that the indexation of pensions in 2020 will be carried out ahead of inflation.
However, so far these measures have not had a radical impact on the situation - they are aimed at future periods. A reasonable question is why, year after year, the Pension Fund of Russia fails to establish the pension system in its normal form.
Apparently, the problem is the ineffective use and expenditure of collected funds. What is the most luxurious building in any regional center? Local branch of the Pension Fund. And not just big, but luxurious, for which there is no practical need. Add to this the salaries of top managers, expensive vehicles and immensely bloated staff that need to be fed.
To make the scale of the problems clear, here are a few figures that allow us to compare the efficiency of the Pension Fund and pension funds of other states. Russia, with a population of 146 million people, has the largest pension fund staff in the world - about 122 thousand people.
For comparison, in Japan, which has a similar population, with about 126.7 million inhabitants, the pension fund staff numbers 27 thousand people. Of these, only 15 thousand are full-time employees.
In the United States, where about 350 million people live, the number of pension fund employees is 60 thousand people, while the volume of pension obligations is almost 10 times higher than in Russia. And the pension fund of ten million Sweden employs only about 1 thousand people.
At one time, the famous Swedish economist Anders Aslund, assessing the quality of work of the Ukrainian pension fund, which has exactly the same problems as the Russian one (with a population of 43 million, the number of pension fund employees there is about 36 thousand people), expressed the following thought: “Pension the fund has no functions. Everything they do can be done with one computer.”
Probably, to some extent, this statement applies to the Pension Fund, otherwise it would not have been necessary to freeze the funded part of pensions and extend this decision from year to year,” the expert expressed his opinion.
As REGNUM , a federal law has been signed providing for the extension of the “freeze” of funded pensions for another two years (until 2021 inclusive).
How will the redistribution of contributions to the insurance part affect future benefits?
The government assures that freezing funded pensions does not mean that these incomes are lost.
It was promised that “frozen” finances, currently used for insurance payments, would in the future be transformed into IPC, that is, they would be converted into points. But is the replacement equivalent? After all, citizens had the opportunity to invest the money supply, accumulated in the form of 6% deductions, in various funds, increasing the return on capital.
Linking finances to points risks the fact that the cost of the IPC is unstable and depends on the economic situation in the country.
Are compensation measures included in the law?
According to the authors of the law on freezing savings No. 413-FZ, citizens’ pension rights to insurance coverage will be respected in full, and no compensation measures will be provided.
Contributions paid by citizens before 2014, i.e. before the announcement of a moratorium on the funded part of the pension, are stored in the individual account of the investor and are at his disposal.
WHAT IS THE ACCUMULATION PART AND WHO IS RIGHT TO IT?
The essence of the changes taking place in the formation of the funded part of the pension, according to the latest news, concerns the following. The previously available duration will be increased again and will amount to 264 months in 2021 instead of 258 last year.
Theoretically, in the Russian Federation, citizens can create their savings through insurance premiums, receiving income from investing them or manually replenishing a personal account.
1. Even without official experience, enter into an agreement with a non-state pension fund. For the purpose of subsequent receipt of funds not related to the state mandatory security system.
2. Contact your employer (the rule is only for those born in 1967 and later) so that he transfers part of the insurance premiums into savings. This had to be done before the end of 2020, but since 2014 all transferred contributions go to insurance contributions, regardless of the employee’s wishes.
3. Persons born in 1967 Participation in the program was offered on a voluntary basis.
The latest news has repeatedly reported about the extension of the freeze and the insignificant amount of funds that citizens manage to save. The possibility of increasing the monthly amount was repeatedly mentioned. For example, applying for it three years later than the due date, since the amount of pension savings in this case will be divided not by 258 months, but by 216.
HOW TO FIND OUT THE SIZE OF YOUR SAVINGS
The funded part of the pension has nothing to do with the state pension, which consists of a fixed payment and an insurance part. This is 2%, which was paid at the beginning of this century, and 6%, which was transferred for a short time until the end of 2013.
Those who have entered into agreements with non-governmental organizations can inquire at the place of transfer, if one still exists. In 2021, it is possible to find out how much is in the account:
- On the State Services portal, if the citizen has a personal account. In it you can find a special section “Notice on the status of a personal account in the Pension Fund of Russia”. Even if the funded pension was transferred for a short time, the amount must still be reflected.
- In the Multifunctional Center, where the employee will provide the necessary information and print the document. This is a more suitable method for older people who have difficulty using a computer.
- Request the necessary information from the Pension Fund branch.
The amount increases annually by the percentage of inflation.
