Russia’s pension system in the context of world experience and expected trends

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Title: Russia’s pension system in the context of world experience and expected trends
Author: Vlasov, Sergey ; Mamedli, Mariam
Organization: Suomen Pankki
Bank of Finland
Department / Unit: Siirtymätalouksien tutkimuslaitos (BOFIT)
Institute for Economies in Transition (BOFIT)
Series: BOFIT Policy Brief
Series number: 10/2018
Year of publication: 2018
Publication date: 20.12.2018
Pages: 27
Subject (yso): eläkkeet; kustannukset; eläkejärjestelmät; eläkeikä; julkinen talous; eläkerahastot
Keywords: Bofit-kokoelma; Venäjä; eläkeuudistukset
JEL: H55; H68; H75
Other keywords: pension fund revenues and expenditures; pension reforms; retirement age increase; fiscal sustainability; Russia
Abstract: Russia’s level of pension provision lags most OECD countries, as well as faces challenges from rising pension fund deficits and an aging population. On the current course, in the long run Russia can expect decreased budget revenues that would require to adjust government spending. While many countries moved after the 2008 global financial crisis to overhaul their pension systems, Russia postponed action until recently. This paper presents estimates of retirement pension expenditures through 2035 under various assumptions about economic growth, demographic composition, and possible reforms to the pension system. Two recent measures by the government (abolition of indexing adjustments for working retirees and an increase in the retirement age for public servants) will slightly mitigate the long-term negative trends. For any of our assumptions, Russia’s decision to begin raising the retirement age by six months a year starting in 2019 will put the retirement pension expenditures relative to GDP on the downward trajectory. This reform allows an accelerating increase in pensions to improve retiree welfare and makes up for some of expected decline in overall budget revenues, making it easier to stabilize the level of public spending relative to GDP. Acceleration of economic growth backed by structural reforms limits further the growth in pension expenditures.

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