Order of the Ministry of Finance of the Russian Federation dated November 18, 2005 N 140n, Moscow “On approval of the Procedure for calculating the results of investing pension savings for their reflection in special

Where is the alternative?

To begin with, let us recall that since 2002, the pension in our country consists of two parts: insurance and funded.
However, there is a third type of pension, which few people know about yet. This is a non-state pension provision. Simply put, it is a variant of pension insurance, when you save for life in the “third age” for yourself with the help of pension funds. And if you’re lucky with a job, then together with the employer as part of a corporate social program. In essence, non-state pension provision is like voluntary health insurance. You can go to the district clinic under the compulsory medical insurance policy, or you can choose a better clinic and a specialist with higher qualifications under the VHI program. In the same way, independent choice of a non-state pension fund (NPF) provides a real alternative to the state pension.

How much is in the account and how much is paid out?

According to the Bank of Russia, at the end of the 3rd quarter of 2020, 6.2 million residents of the country generated 1.2 trillion pension rubles (the average account is 201 thousand rubles) as part of non-state pension provision. Moreover, within the framework of corporate pension programs, 1.5 million pensioners are already receiving payments. The average payment reaches 3,334 rubles per month. For many, this is a very significant addition to the pension paid by the Russian Pension Fund, considering that on average it is 13,323 rubles per month.

Question answer

Why shouldn't you change NPF often? Those who entrusted funds to the NPF essentially made long-term deposits with interest, payments for which usually begin upon retirement. And it is necessary to understand the interest rate, as in the case of a deposit. By the way, just like deposits, this money is inherited - unlike an insurance pension. But what is more profitable: saving in a deposit so that you can slowly withdraw money from it in retirement, or in a pension account?

The profitability of investing pension savings in NPF Heritage amounted to 16.93%

The non-state pension fund "Heritage" became the leader in terms of profitability of investing pension savings in 2020 among the largest non-state pension funds. It amounted to 16.93% per annum, exceeding both inflation and the profitability of the state management company. The fund is the leader in terms of profitability of investing pension savings among non-state pension funds, the volume of pension savings of which exceeds 10 billion rubles.

These data were published in the Bank of Russia report on the main performance indicators of non-state pension funds over the past year.

The income received as a result of investment allows clients of NPF Heritage to increase the accumulated amount by the time of retirement. At the end of last year, about 6.5 billion rubles were distributed to individual accounts. And citizens who have been clients of the fund for more than 10 years have at least doubled their savings during this time. The cumulative return on pension savings reflected in pension accounts for the period 2005-2015 amounted to 119.47% per annum. Moreover, these real funds are not only invested and generate income, but also inherited.

CJSC NPF Heritage, which until 2014 was called NPF Norilsk Nickel, has been among the leaders in the pension market in terms of key performance indicators for more than 22 years. The volume of pension savings of the fund's clients is about 50 billion rubles. Almost 100 thousand people form an additional non-state pension at Heritage, and more than 23 thousand are already receiving it. The total volume of pension payments to citizens and their legal successors in 2020 alone exceeded 1.5 billion rubles.

The safety of pension savings transferred to NPFs is strictly controlled by the state. NPF Heritage CJSC was one of the first non-state pension funds to join the system of guaranteeing the rights of insured persons. The high reliability of the fund is confirmed by the AA+ rating assigned by the National Rating Agency.

The foundation's priorities are information openness and transparency. Each client can use the fund’s website https://npfn.ru/ and monitor their individual account online.

At the end of last year, the fund launched a free mobile application for iOS and Android. By installing it on your smartphone, you can monitor the status of your pension account and fund news at any time.

Professional advice can be obtained at the fund’s offices and by calling the hotline -800-700-00-51. Calls within Russia are free.

License of the Bank of Russia No. ½ dated July 27, 2004 to carry out activities related to pension provision and pension insurance. The profitability indicator was calculated in accordance with the order of the Ministry of Finance of Russia dated August 22, 2005 N 107n.

The situation with coronavirus in the Penza region.

Where is it more profitable to store?

(PIAK) conducted a study and studied the accounting statements of non-state pension funds. As a result, it turned out that in 2013-2017. the average level of accumulated return was 39.04%, which is only slightly less than the accumulated return on annual deposits (excluding demand deposits): 41.83%. Moreover, in recent years this difference has been decreasing.

Despite the slight lag of average NPF indicators from deposit rates, the real profitability of pension accounts in them is much higher. This is achieved, firstly, through a deduction for income tax (13%, but not more than 15,600 rubles per year), and secondly, through the widespread co-financing of voluntary contributions by employers within the framework of corporate pension programs.

“Bank deposits are deprived of such incentives, but provide for taxation of income at interest rates exceeding the key interest rate,” explains company analyst Evgeniy Biezbardis .

There is one more important nuance. The Pension Fund of the Russian Federation, according to its investment strategy, invests almost all its funds in bonds and deposits, and non-state funds diversify their investments much more through stocks, mortgage securities and units of mutual investment accounts. Of course, stocks are considered a riskier financial instrument. But with them there are also more opportunities to earn a high income - it is important that this is done by professionals who understand the laws of the stock market.

A comparison of voluntary pension contributions with another common financial product - investment life insurance (ILI) - was not in favor of the latter, although until recently it was widely promoted as a supplement to deposits. The Bank of Russia estimated the average five-year profitability of ILI contracts completed in 2017-2018 at 2.4% per annum. Thus, the accumulated profitability for 2013-2017 was about 13.1%. It is clear that 39.04% is significantly higher.

How to start saving?

In order to open a savings account in a non-state pension fund, you don’t need to go to the Russian Pension Fund at all - it has nothing to do with it. And sometimes there is no need to go anywhere at all. Some private pension funds have already implemented the ability to remotely, through the NPF website, enter into an agreement, deposit funds and change conditions.

One thing is necessary - choose a non-state pension fund. Another thing is how to do this?

Question answer

How to find out which NPF your pension is in? Now the degree of reliability of non-state funds has significantly increased due to measures taken by the Bank of Russia. Firstly, they have turned from opaque non-profit organizations into joint stock companies. Secondly, like banks, non-state pension funds undergo stress tests for the stability of investment portfolios. And managers are responsible for every investment decision, or lack thereof, in the best interests of their clients.

When deciding on a fund, it is worth finding information about it - find out how long it has been on the market, what the profitability has been over the last 5-10 years, and also look at independent ratings of non-state pension funds. One of them, based on its research, was compiled by PiAK - this is a rating of the accumulated profitability of the largest Russian non-state pension funds. If we take the size of pension reserves under management (over 1 billion rubles), then the list of the most successful NPFs is headed by NPF Safmar with an indicator of 49.33%, followed by the First Industrial Alliance with 47.53%, and then - "Rostvertol" - 47.09%. At the same time, the accumulated return on deposits (excluding demand deposits) for this period amounted to 41.83%, inflation - 39.04%.

We publish this rating to help our readers evaluate the reliability and profitability of various funds, as well as make the right choice.

Please also note that past investment results do not determine future returns.

Cumulative return rating, 2013-2017:

NPFAccumulated profitability of placement of pension reserve funds for 2013-2017.
1 Retirement choice 64.47%
2 Tradition 60.06%
3 Agreement 59.22%
4 RGS 53.61%
5 Confidence 53.42%
6 Mospromstroy-Fond 53.26%
7 Trust Orenburg 51.38%
8 Safmar 49.33%
9 1st prom. alliance 47.53%
10 Rostvertol 47.09%
11 Gazprombank-fund 46.93%
12 Surgutneftegaz JSC 45.97%
13 Education 45.22%
14 Inflation 44.62%
15 UMMC-Perspective 43.80%
16 Vladimir 43.20%
17 Magnet 42.97%
18 Aviapolis 42.83%
19 Neftegarant-NPO 42.82%
20 Rostec 42.11%
21 Alliance 41.92%
22 Deposits 41.83%
23 Atomgarant 41.02%
24 National 40.87%
25 VTB Pens. fund 40.83%
26 Gazfond PN 40.79%
27 Mean median 40.59%
28 Pension-Invest 40.59%
29 APK-Fond 40.21%
30 Welfare 40.03%
31 Volga-Capital 39.97%
32 NPF Sberbank 39.63%
33 Average 39.04%
34 Renaissance of pensions 38.98%
35 Ingosstrakh-Pension 38.72%
36 Vnesheconomfond 38.38%
37 Social world 35.89%
38 Diamond Autumn 34.92%
39 Hephaestus 34.89%
40 Social development 33.92%
41 Kh.-Mansiysk 33.82%
42 Empire 33.45%
43 Titanium 33.13%
44 Construction complex 30.68%
45 NPFe 30.42%
46 Shipbuilder 27.58%
47 Society 27.57%
48 OPF 25.07%
49 VNIIEF-Garant 21.67%
50 Telecom-Soyuz 19.47%
51 Coal 16.77%
52 Gazfond 13.62%
53 Professional 3.00%

The indicators of funds with pension reserves of more than 1 billion rubles are highlighted in black font.

Source : data from Rosstat, the Central Bank and NPF reporting on industry accounting standards, published on the funds’ websites. Calculations - “Pension and Actuarial Consultations”.

The savings of most private pension funds have been eaten up by inflation

Comments from pension funds, which during the five-year period under review went through the procedure of joining other funds (see the information “As They Believed”), contradict each other. Some NPFs say that there is no standard methodology for calculating the effect of accession, while others, on the contrary, reported the results of their work with the effect of accession, but over a seven-year period. At the same time, in general, NPFs that did not carry out the reorganization responded that they agreed with the final assessments of Expert RA. ​

In funds whose profitability, according to Expert RA calculations, has not outperformed VEB’s results and inflation, they appeal to the fact that it is necessary to evaluate a longer period, since it is the net profitability that is important for clients, and in the case of other NPFs joining the fund, the accumulated profitability indicator relevant only for clients of “pristine” non-state pension funds.

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Thus, the press service of NPF Safmar said that now about 80% of clients of NPF Safmar are clients of the former NPF Evropeisky, which was merged with NPF Safmar in mid-2020. “The accumulated return on this fund over the past five years is 59.4%,” the press service said. Therefore, the profitability shown in the table refers to clients of NPF Raiffeisen who entered the fund before 2012. Since 2020, this fund has been renamed NPF Safmar.

“Currently, there is no generally accepted methodology for calculating the annual and accumulated return of portfolios of combined funds,” said the press service of NPF Safmar.

The press service of the NPF “Doverie” stated that the yield published by the Central Bank is a calculated, accounting value. “For insured persons, another indicator is much more important - what kind of profitability the fund reflected on clients’ accounts. The profitability that NPF “Doverie” accrued to the accounts of its clients for compulsory pension insurance for the period 2012–2016 is 49.3%. That is, we essentially protected our clients from inflation,” the pension fund claims.

According to the executive director of NPF Safmar, Evgeny Yakushev, the excess of the net profitability indicator over the so-called dirty one (gross profitability according to the Central Bank methodology) does occur. “The increase in net profitability compared to dirty profitability may be due to the fact that in some periods the number of clients decreased, but assets remained the same. So, for example, in the first quarter, when the client already leaves for another fund, his savings remain for some time in the previous fund and continue to be invested, and the profitability that is generated during this period remains in the fund and is credited to the accounts of other clients,” Yakushev explains the “anomaly”.

The press service of the NPF “Future” clarified that the data reflects the accumulated profitability of the fund, but emphasized that the calculation algorithm does not take into account the factor of the fund’s reorganization and the accession of other NPFs to the fund over the past three years. “Also, the 2014 profitability is indicated only for the NPF Blagosostoyanie before its division, but not after, when compulsory pension insurance activities were already carried out by the NPF Blagosostoyanie OPS (the previous name of the NPF Future),” the NPF said.

At the same time, the fund did not calculate the accumulated return for five years, but provided only the return for the period 2009–2016: 95.4% against accumulated inflation of 88.78%. As the fund's press service explained, this figure takes into account the profitability of affiliated funds.

“The assumption of a certain volatility of returns in the short term is another characteristic of long-term investors who are results-oriented over long periods of time, since NPF clients form savings over a long period,” emphasized the Future NPF.

The NPF of the electric power industry also agreed with the calculations. The fund's press service noted that over the past 12 years, in 2005–2016, the accumulated return on investment of the fund's pension savings amounted to 152.73%, which exceeds the same figure for the state management company.

Chairman of the Board of Directors of NPF Bolshoy Alexey Goncharov said that NPF focuses on inflation as a benchmark. “If we take 2005 as a starting point, then for the period until 2020 the accumulated inflation was 189.2%, our accumulated profitability was 199.6%, and the accumulated profitability of VEB was 132.8%,” Goncharov shared his calculations.

Deputy General Director of NPF VTB Alexander Lvov said that the accumulated accrued return on customer accounts over the past five years amounted to 46.5%. “This level is due to a balanced risk investment policy - pension savings are placed in highly reliable assets. The structure of the investment portfolio is available on the official website of the NPF,” Lvov said.

Director of the investment department of the NPF Gazfond Pension Savings Yuri Mishukov noted that the profitability of investing pension savings in the period from 2012 to 2020 inclusive amounted to 9.5% per annum, with average annual inflation during the specified period being 7.52%.

The press service of NPF LUKOIL-Garant reported that it is not possible for the fund to confirm the calculations of Expert RA. They also said that, according to their calculations, the cumulative return of the fund from 2005 to 2020 was 175% against inflation of 133.8%.

The press service of NPF Neftegarant declined to make any other comments, pointing only to information from the NPF website, which shows the accumulated profitability for the period from 2006 to 2020 (144.8%). The rest of the NPFs listed in the rating did not respond to RBC's request.

Crisis results

Despite the reservations of some funds and the nuances of the methodology, the conclusions obtained from the research correspond to the real results of the funds’ work, the rating participants admit. The study demonstrates that NPFs with more conservative strategies manage to outperform inflation and the results of the state management company, but there are only a few such NPFs.

When comparing the profitability of non-state pension funds and state management companies, one must understand that the state management company has a more conservative investment declaration - for example, state management companies cannot invest in shares, unlike non-state pension funds, clarifies general director Sergei Okolesnov.

The main blow to NPFs over the last five years came in 2014, when bonds were overvalued by funds due to a sharp increase in the key rate, says Yuri Nogin, director of the ACRA group of financial institution ratings. “As we see, the funds have not yet managed to win back this fall,” he adds.

Meanwhile, since 2020, the investment structure of pension savings began to change - NPFs began to invest more actively in shares, since corporate bonds did not provide acceptable returns, Nogin recalls. However, shares are a more volatile instrument, which led to a new drawdown in fund results at the beginning of 2020 amid sanctions, he says. However, non-state pension funds that adhered to a conservative investment policy demonstrated good profitability, the expert clarifies.

Blocks of shares in NPF savings lead to the fact that non-state funds are subject to greater volatility during periods of market instability, Okolesnov believes. However, the laws of the market state that over longer horizons (15–20 years), risky strategies turn out to be more profitable than conservative ones, the expert is sure. “But this can only be verified after this period has expired,” he notes.

At the same time, over the past 10–15 years, stocks have been losing out to bonds in terms of profitability and risk parameters, says Alexander Abramov, head of the laboratory for analysis of institutions and financial markets at RANEPA. “Russia is one of the few countries in the world where the equity risk premium is negative,” he says.

In addition, the NPF market is in a phase of uncertainty due to the fact that no new income from employees is expected against the backdrop of freezing pension savings, and the concept of individual pension capital (IPC), which should replace the current savings system, has not been adopted, he says Yuri Nogin. Therefore, according to him, talking about 20-year horizons is now pointless.

If we continue to evaluate the results of the funds’ work over a long-term horizon, then, according to Abramov, the main drawback of NPFs is their inability to fight devaluation during crises, as demonstrated by the results of the funds’ work in 1998, 2008 and 2014. “To do this, funds need to change their portfolios - make them more diversified, invest savings not only in ruble assets, but also in ETF indices,” says Abramov. He adds that now NPFs can invest in some ETFs, but these are sectoral indices broken down by country, and this cannot be called diversification.

It can be assumed that funds should now refocus on short horizons - one to three years, but this implies other investment ideas that run counter to the rhetoric about long-term money in the economy and support for infrastructure projects, argues Yuri Nogin.

“NSPF clients don’t have much choice. It is also worth considering that a modern NPF client, as a rule, is not able to assess the effectiveness of portfolio management, since the funds do not disclose, for example, portfolio risk indicators, and the profitability on the Central Bank website is a dirty profitability, which does not take into account the deduction of the costs of maintaining a special depository, administration of the NPF and remuneration of the management company,” says Abramov.

The problem with the profitability of non-state pension funds is that recently there has been quite high inflation in Russia, says Abramov. “In one of the studies in our laboratory, we calculated that pension funds in different countries of the world, as a rule, outperform inflation when it is at a level of 4–4.5%,” Abramov shares the results. Now, according to him, Russia has entered just such a phase, and there is a chance that investments in ruble instruments will begin to outpace inflation. However, the question now is how long inflation will remain at this level, experts add.

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