The experiment launched in 2022 failed
The Ministry of Finance entered into an absentee conceptual dispute with analysts from the RANEPA on the issue of funded pensions. According to the department of Anton Siluanov, the introduction in 2002 of various lump-sum payments and allowances led to a turning point in the minds of Russians: the rigidly “paternalistic” approach was replaced by the understanding that you would also have to save for old age yourself, not relying solely on the state. In turn, scientists from the RANEPA are skeptical about the results of this long-term practice, pointing to the low profitability of non-state pension funds, which cuts the very idea in the bud. As the last twenty years have shown, the truth is on their side.
The average gross profitability (the ratio of a company's gross income to the number of goods and services produced by it) of NPF portfolios in 2005-2020 only slightly outplayed inflation, and by the criterion of net profitability (net margin) it was significantly inferior to it, RANEPA notes. Thus, pension savings lose their meaning. The Ministry of Finance clearly does not agree with this thesis, although they admit: “certainly, the annual profitability received by NPFs from the results of investment from the beginning of their activities was insufficient for a number of objective reasons.”
They say that times were difficult, the domestic economy was just recovering after the upheavals of the dashing 1990s. But what a wonderful metamorphosis happened then with the Russians, who came to understand the need to independently generate additional income for a future pension. Recall that the solidary pension system still dominates in the country. Under it, the current workers with contributions from their salaries (to the unified Social Fund, in the past — the Pension Fund) «pay» for the pensions of elderly fellow citizens. In the funded system, a person independently, through contributions to the NPF from his salary, forms a future pension. But in reality, there are few such people in Russia.
“The widespread thesis that the introduction of the mechanism of funded pensions in 2002 made a massive revolution in the minds is unfounded,” says Alexei Zubets, a professor at the Financial University under the Government of the Russian Federation. — People are concerned about their future not at all because the authorities pushed them to this by their administrative decision. Life itself pushed them to this: those who were 25, 30, 35 years old managed to integrate into the new economic realities, finally losing faith in the paternalistic idea, in the social orientation and good intentions of the state, having seen enough of the total lack of money in the 1990s, how helpless, abandoned old people then died from poor-quality food.
It was they, according to Zubets, who began to save for their own retirement, unlike citizens over the age of 40, who continued to think in Soviet categories. In general, the interlocutor of MK notes, today only a small part of Russians saves in a targeted way for old age. Rather, we are talking about some kind of synthetic savings practice: money is needed for an apartment, a car, for the education of children, treatment, recreation, and so on. Individuals keep about $100 billion and 35 trillion rubles in bank accounts, and some other amount “under the pillow”. But there are still investment apartments. As for NPFs, today their services are mainly used by employees of corporations, part of whose salary goes to the accounts of these funds — on a voluntary-compulsory basis.
“The bulk of Russians still rely solely on the state in the issue of pensions,” says Pavel Kudyukin, a member of the Council of the Confederation of Labor of Russia. — As before, the employer deducts contributions to the general fund of the Social Fund, and the employees do not think about anything. The exception here is individual entrepreneurs, and even those prefer to limit themselves to the minimum possible amounts. As for NPFs, their very existence requires not only a much more active financial behavior of people, but also greater predictability in the economy, stability with consumer prices, with the exchange rate. There is none of this, as well as reliable and highly profitable financial instruments, a developed stock market: without all this, funded pensions lose their meaning; shares of companies, government securities, with which NPFs work, provide income slightly above the inflation rate.”
When the system was introduced in 2002, there were exaggerated expectations associated with it. Meanwhile, the world experience already available at that time warned of risks and pitfalls. For example, in Chile, which in 1981 abruptly switched from a solidarity pension model to a funded one, NPFs went bankrupt en masse. As for Russia, its peculiarity is that the vast majority of citizens, with a very low level of income, simply have nowhere to take money to deduct it somewhere on their own. The situation is aggravated by the general uncertainty — economic and political, sums up Kudyukin.