The Ministry of Finance and the Central Bank of the Russian Federation have defined the key parameters of the new funded pensions system, namely, the guaranteed pension plan (GPP). A bill on it will be put up for public discussion, according to the sources close to the initiators of the law.
The concept envisions a reduction of personal income tax and of corporate income tax for employers co-financing their employees' personal pension savings, say the sources close to the initiators amendments to the relevant legislative acts. Moreover, within the framework of non-state pension scheme (NPS), the new standardized pension plan will make it possible to convert the workers' accumulated as part of compulsory pension insurance (CPI), as well as the previously accumulated NPS funds. The Russians will be attracted to GPP through a number of benefits. Thus, the corporate income tax base will be reduced for employers co-financing their employees’ savings. For the employees, the personal income base tax will be cut down. The principle of inheriting the funds should become one more factor motivating towards savings for retirement. It will apply not only to the accumulation phase, which has been already implemented in the CPI, but also to the payout phase. Under the new system, a pension can be received after reaching the retirement age or 30 years after the savings started. The Central Securities Depository (National Settlement Depository) will monitor pension contributions and maintain the register of GPP members. Vladimir Ryazansky, the chairman of the social policy committee in the upper house of Russian parliament and President of the Russian Association of Retired Persons, has already noted the advantages of the new system. The main of them is voluntary participation in the program. “The motivation of workers and employers towards contributing to the accumulation component is also positive, because there is a motivation to cut down taxes, including the possibility of reducing the personal income tax rate,” Ryazansky said. In turn, Valentina Matviyenko, the chairperson of the upper house, considered that the Russians did not have enough savings to enable the bill on GPP operate at its full capacity. In early autumn, the Ministry of Finance said it was working on a bill of a new system of non-governmental pension savings under the provisional title ‘the guaranteed pension product’. With this document, the ministry is going to replace the previously discussed concept of the system of ‘individual retirement capital’, which could not be approved because of disputes over it in the government. The Ministry of Finance emphasizes that participation in the new system will be voluntary for the Russians. Although the authorities are trying to show this system off as something new, experts believe that nothing in general has changed in this idea of the federal department. The authorities are ready to offer the Russians the right to get their savings back ahead of schedule. However, they charge a full income tax on the refund. In addition, as an argument in support of participation in the new pension scheme, a proposal was made to provide the citizens with the opportunity to receive early pension payments under the non-governmental system. Sergey Shvetsov, first deputy governor of the Central Bank, stated earlier that the Russians most likely would not participate in the new pension system on a massive scale. There are enough reasons for it, but the main one is the lack of trust. Although the Finance Ministry and the Central Bank, working on the development of a new system, are constantly talking about the importance of public confidence in the actions of the financial authorities, the Russians’ motivation continues diminishing. Another reason for it is the government's decision to extend the freezing of pensions until 2022. It seems that the authorities are trying to pick citizen’s pockets for the second time without returning the ‘frozen’ assets to them.