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Pension Fund of the Russian Federation During Financial Crisis

Pension Fund of the Russian Federation. Pension Fund of the Russian Federation During Financial Crisis. Prof. А. Solovyev Head, Department of Actuarial Computations and Strategic Planning. Annual Average Pensions, 2009. PF Short-Term Objectives During Financial Crisis.

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Pension Fund of the Russian Federation During Financial Crisis

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  1. Pension Fund of the Russian Federation Pension Fund of the Russian Federation During Financial Crisis Prof. А.Solovyev Head, Department of Actuarial Computations and Strategic Planning

  2. Annual Average Pensions, 2009

  3. PF Short-Term Objectives During Financial Crisis Minimal pension guarantee (with social support) not below subsistence level in the region Valorization of pension rights converted in 2002 Transformation of the “basic portion” of labor pension into ‘fixed basic” size of contributory pension determined by contributions history Establish social top-up to labor pension which is below PSL in the region Changing indexation of fixedbasic size of labor pensionin line with indexation of contributory portion Establish social top-up to social pension which is below PSL in the region Promotion of retirement income by claiming pensions later Changing indexation of social pensionin line with the growth of subsistence level in the region

  4. Current system Revised Labor Pension Changing Indexation of Labor Pension Fixed basic size of contributory portion of labor pension Basic portion of labor pension Inflation-indexed wage-indexed but not to exceed PF revenues per pensioner Wage-indexed but not to exceed PF revenues per pensioner Insurance component of contributory portion of labor pension Contributory portion of labor pension

  5. 100% 90% 80% 45.8% 48.9% 49.6% 50.4% 50.9% 70% 60% 58.8% 58.8% 58.9% 58.2% 57.9% 50% 42.1% 41.8% 41.2% 41.2% 41.1% 40% 30% 54.2% 51.1% 50.4% 49.6% 49.1% 20% 10% 0% 2010 2015 2020 2025 2030 Basic portion of labor pension Contributory portion, BAU Fixed basic size, baseline Contributory portion, baseline Revised Labor Pension from 2010

  6. Increasing pensions ANNUAL AVERAGE GROWTH OF LABOR PENSION 2009 2010 FIXED BASIC SIZE BASIC PORTION OF СONTRIBUTORY INCREASE = 820 2,301 PORTION 3,1 21 CONTRIBUTORY PORTION INDEXATION 6 . 3 % = 390 CONTRIBUTORY PORTION 2,917 4,446 VALORIZATION = 1139 LABOR PENSION LABOR PENSION INCREMENT = 2,349 5,218 7, 567

  7. Short-term Financial Outcomes, bln. RUR.

  8. Long-Term Goals of the Pension Fund of Russia Set contribution rates for individual entrepreneurs based on a minimal value for contributing year - fixed payment Set contribution rates needed to create pension rights for future pensioners providing at least 40% of lost income with at least 30 years of seniority Increase contribution portion recorded at individual accounts from 14% to 16% Promote investments by contributors to enhance their retirement income through pension accumulations Eliminate regressive scale and introduce a cap for contribution base at 1.5 of average annual income of worker (95% of employees) PF of Russia to administer pension contributions

  9. Rates for employers-businesses in 1999-2011 (w/o UST rate in 2002-2009) 30,0% 28% 28% 28% 28,0% 26% 26,0% 24,0% 22,0% 20% 20,0% 18,0% 16,0% 14% 14% 14% 14% 14% 14% 14% 14% 14,0% 12,0% 10,0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Employers-businesses

  10. Replacement Rate 60% 55% 47.6% 50% 45% 40.5% 40% 37.2% 35% 30% 29.5% 25% 20% 2010 2015 2020 2025 2030 Old-age labor pension, baseline Old-age labor pension, BAU

  11. Annual Average Social Pension, RUR 17,611 18000 15,853 15000 14,062 12000 12,699 10,964 10,006 9000 8,080 7,563 6000 4,835 4,835 3000 2010 2015 2020 2025 2030 BAU Baseline

  12. Availability of Funds at PF of Russia During Transition, billion RUR 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -262.7 -200 -323.0 -349.4 -453.8 -470.0 -400 -501.1 -632.0 -600 -845.0 -800 -1,051.4 -1 000 -1,120.9 -1,237.9 -1 200 -1,441 -1 400 -1 600 Current deficit (-), surplus (+), billion RUR

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