Pension system in quest for balanced scenario

Nazarov Vladimir

Gaidar Institute for Gaidar Institute for Economic PolicyEconomic Policy

Structure of pension 3 pillars: Conditions for pension entitlement-basic pension min record period – 5 years-PAYGO NDC pension age: 55 - w, 60 – m-FF NDC + minimum living standard guarantee+ “social pension” (people who don’t have 5 years record period receive social pension equals to minimum living standard at 65 – m, 60 – w)Rules of indexation 1) Basic pension + PAYGO NDCEvery year according to the PF revenue growth per pensioner but not less than inflation2) Minimum standard guarantee, social pension – according to minimum living standard

Social “insurance” tariffs – high burden,% of salary

Tax base

Threshold = 163% of the average wage

Pension

Social Healthcare Total

“Individual” tariff

Solidarity tariff

Total

PAYGO NDC tariff

FF DC tariff

old young old young

Below 16 10 0 6 6 26 2,9 5,1 30Above 0 10 10 0 10Basic pension – solidarity tariff + federal budget

PAYGO NDC – “individual” tariff + federal budget

FF DC - “individual tariff” + federal budget (modest co-financing program)

Social pension – federal budget

Minimum living standard guarantee – federal and regional budgets

Aging of population (thousands of people)

Basic scenario - finance

Basic scenario – replacement rate

The cost of fixing the replacement rate at 2012-level:-1% of annual tariff increase or-1% of GDP as every 5 years increase of federal budget transfer to the Pension Fund

Deficit reduction – reform proposals