Recently it became known that the State Duma extended the freezing of the funded part of the pension until 2020. The new bill was passed quite quickly, as the deputies had few questions. This is not surprising, since in 2014 freezing has been carried out for the fifth time. The adopted measure is used as a tool to successfully eliminate the budget deficit.
It is worth saying that the Russian inhabitants without enthusiasm adopted a similar legislative initiative. Moreover, it turned out that not all citizens know how the pension system functions in Russia. Need to fill the gaps in knowledge. Let's see what is the freezing of the funded part of the pension? What does this mean for ordinary people and what are the consequences?
Types of Pensions
Before discussing the essence of freezing the funded part of a pension, you need to understand the types of payments.
So, in Russia, two types of pensions are available to citizens. It is social and labor. Their essence is different.
The state pays a social pension, and its size is determined by the region of residence and accrued benefits.
With a retirement pension, everything is much more complicated. Contributions to the appropriate fund are made by the employer. Monthly, he transfers 22% of the employee's salary.
Changes
Since 2002, the separation of labor pension into insurance and funded has been in force.
In the same year, the bill divided all citizens into three categories. Two of them should independently form the funded part. However, in two thousand and four, a new division occurred. This time, there are already two groups, one of which must take care of the funded part of the pension. They included citizens born in 1967 and younger.
For ten years, everything happened relatively. However, in 2014, when the ruble collapsed and the economic crisis, serious problems were discovered in the Pension Fund. In this regard, the government decided to freeze the funded part.
How are pensions formed?
This is important to understand in order to better understand the essence of freezing. So, for citizens born in 1967 and later, the pension should consist of two parts, that is, insurance and funded. There is a subtle difference between them.
For example, the insurance part is immediately credited to future retirement benefits. With funded, everything is somewhat different. Initially, it was assumed that this money should be spent on long-term investments, invested in all kinds of financial instruments that would reduce the negative impact of Russian inflation and even increase savings. Perhaps everything would have been exactly like this if it had not been for the economic crisis that has gone through many Russian citizens like a skating rink on asphalt.
What is the meaning of freezing the funded part of the pension?
As you know, this happened in 2014. All contributions that should have been part of the funded part are now redirected to current insurance payments. Of course, this is inconvenient for citizens. But in fact, they do not affect the situation. Officials use insurance premiums. After all, they are not sent to some kind of savings account. The government uses them right away, listing them to current retirees. Of the part of the funds, salaries are paid to doctors, teachers, and officials.
And what about those who counted on the funded part in the future? Instead of real money transferred from the employer, they receive retirement points. Their number determines the amount of payments upon reaching the appropriate age.By the way, he was also recently raised, for some reason, focusing on European experience, but forgetting about the huge difference in salaries.
This is the essence of freezing the funded part of the pension. What this means, you now know. In fact, instead of the money transferred to the budget, today's workers get points, which, after a decade or more, should turn into rubles. It is not known which bill the Russian government will pass in the future. It is possible that the accumulative savings of citizens will not become a significant increase in future retirement.
Consequences of freezing the funded part of the pension
The government has calculated everything. Once again, the bill was extended. Thanks to the freezing of the funded part of the pension, the government will be able to get about 551.3 billion rubles. Agree, the amount is impressive. This money will be directed to payments to today's pensioners. Those who planned in good faith to form the funded part will no longer be able to do this.
The presidential decree on freezing the funded part of the pension does not allow citizens to further save money for a future pension. Even balls do not compensate for this. After all, future pensioners are deprived of the income that they could get with the right investment. However, it is curious that not everyone took the opportunity to increase their own savings. For example, the funded part was often transferred to such funds that brought profitability that could not even cover inflation. What profit can we talk about? Now you know what threatens the freezing of the funded part of the pension.
On the other hand, any kind of income is still better than its complete absence. Indeed, now the transferred money will be transferred to points, and upon reaching retirement age, the size of payments will be calculated on their basis. It is difficult to say how high they turn out to be. Atrocious inflation at cosmic speed devalues the ruble savings of Russian citizens. Now the freezing of the funded part of the pension has deprived them of the opportunity to invest and increase their own money. So, the prospects can be quite bleak.
Will the minimum length of service increase?
The freezing of the funded part of the pension is not the only change that concerns Russians who are counting on stable payments upon termination of employment. For example, this affects minimal experience.
Like his retirement age, he was also raised. Now, to receive an insurance pension, Russian citizens need to work at least fifteen years. Previously, this figure was eight years. If you do not accumulate the required amount of experience, you can only rely on a social old-age pension.
About other conditions
Moreover, it is important not only to work out the required number of years, but also to accumulate a certain number of points. They are calculated depending on the amount of payments that a citizen transfers to the Pension Fund. Accordingly, to accumulate more points you need to have a stable and high salary. However, there are very few such vacancies in Russia.
The formula for calculating a pension is so complex that even impressive incomes do not guarantee a high pension and a secured old age. At least for the reason that Russian inflation is able to quickly depreciate ruble savings. Namely, the Pension Fund of Russia stores the funds in this currency.
What will happen to the savings?
This issue worries citizens who regularly made contributions to the pension fund, starting in 2002 and ending in 2014, when there was a freeze.
The accumulated funds will not disappear. However, payments can be received only after reaching the established retirement age.
The essence of the freeze is that after 2014 it will not be possible to make new savings, despite the fact that employers still transfer 22% of employee income to the Pension Fund.
Where is the funded part of the pension stored?
As you know, a citizen could decide where to store these savings. Two options are possible.
- At the Pension Fund. By default, all funds that the employer transfers are sent there. Then, if a citizen has not expressed a desire to transfer his savings to the Non-State Pension Fund, they are transferred for management to Vnesheconombank. You can find out how things are currently with the funded part of your pension remotely on the website of the State Service, as well as in the office of the Pension Fund or the multifunctional center.
- An alternative is to transfer the savings to a private pension fund. In this case, the management company will invest the money of its customers, increasing their funded part of the pension. In this case, the size of the savings must be recognized directly in this organization. As a rule, the profitability of such companies is much higher than that of state-owned companies, however, no one has canceled the possible risks.
How to find your money?
It is worth noting that not all non-governmental funds operate in good faith. Some may slip the contract to the client when applying for a loan or other agreement. It is enough to accidentally put your signature on such a document so that the entire funded part of the pension passes to the management of a non-state fund. Therefore, care should be taken when processing papers.
To know for sure where your savings are located, request a notice showing the status of your personal account. You can get it on the website of the State Service, in the office of the Pension Fund or in a multifunctional center. Use the most preferred option. You can transfer money not only from the state fund to non-state. You can move savings between different NPFs.
Using the extension of the freezing of the funded part of the pension, the government receives additional funds, making the prospect of future payments more and more vague. Now citizens have a choice: leave their savings to the Pension Fund or, conversely, entrust them to an alternative organization. For example, it may be a non-state pension fund that promises higher returns. However, it is worth remembering that at the moment there is a freezing of the funded part. Therefore, you can only manage the money that was transferred to the Pension Fund of Russia no later than 2014.