Pension insurance in Russia

2021: Mishustin: Contributions to mandatory pension insurance for the IT companies will be reduced from 8% to 6%

The size of contributions to mandatory pension insurance for the Russian IT companies in 2021 will be reduced from 8% to 6%. On February 12 the chairman reported about it Governments of the Russian Federation Mikhail Mishustin during the cabinet council of the minister. In more detail here.

2020: Voluntary pension insurance of life: why it is profitable

As of November, 2020, 9% of the population of our planet — pensioners. According to the UN, by 2070 every fifth will a pensioner already^[1]. Around the world life expectancy, but how to make this long life secure grows if the state resources are limited? Voluntary pension insurance of life becomes the solution.

As told in "Association of Insurers of Life" on November 11, 2020, in Russia pension insurance — the small, but surely growing life insurance segment. Its charges make 0.5% of the market so far, but for 2020 they increased more, than by a third^[2]. It means that people care for the future more and more actively, independently ensuring an increase to the state payments.

Voluntary pension insurance in Russia

"The system of pension insurance of life confirmed the efficiency in many countries long ago. You for certain heard about the amount of pension of Denmark. This country from 2012 to 2017 won first place in the rating of the countries with the best pension system. At the same time a noticeable part of pension is made by a funded part, generally — voluntary, i.e. means which inhabitants independently postpone using the selected insurance companies. If to analyze a situation in Denmark, it turns out: big payments are received by the citizens who worked 40 years and regularly saving money during this time. A similar state of affairs and in other European countries. If to look at Russia, then we will see: pension insurance of life in our country promptly develops. As guarantee of its popularity, first of all, serve availability, efficiency and need of Russians to provide a good increase to pension. One more motivation independently to create savings prolongation of freezing of an investment part of the state pension till 2024 is. So personal accounts of Russians are not replenished within 10 years. It once again confirms need to each of us to care for the future" — Sergey Perelygin, the president of Association of Insurers of Life noted.

Among the reasons why Russians select voluntary pension insurance, without being limited to obligatory:

• To save the usual standard of living. Insurance savings will provide an increase to pension, and after 60-65 years it is not necessary to cut down expenses sharply.
• Not to depend on relatives or the state. The traditional model — to give birth to more than two children to guarantee itself financial stability on pension — is a thing of the past. Modern people prefer to expect the income and the pension funds.
• To receive pension regardless of an experience. The state pays insurance pension only to those who officially worked at least 10 years (and in 2024 the required experience will increase up to 15 years^[3]). Self-employed and foreigners can create the pension using voluntary pension insurance.

Among advantages of voluntary pension insurance:

• Controlled contributions and conditions of insurance
  • It is possible to select the term of savings, the size and frequency of contributions: once a month, quarterly or once a year. Besides, it is possible to regulate also the payment schedule, having defined option of payment of savings, i.e. the person himself defines, wants to receive the money in one step or within several years.

• Guarantee of preserving of savings
  • At an unforeseen injury or a disease the insurance company will help to cope with a difficult situation and to save savings. Also there are additional programs of accumulative pension insurance at which the person, having received the 1 or 2 group of disability, is exempted from contributions and even receives the savings to the term determined in the agreement.

• The inherited pension
  • If something happens to the insured person before he received all payments, money does not burn down, and continues to be paid to in advance selected successor.

The amount of pension depends on two indicators:

• individual income,
• substitution coefficient, i.e. ratio of average pension and average salary in the country.

According to the recommendations of the World Bank the normal coefficient of substitution should be 40%. The same indicator is stated also in the International Labour Organization Convention.

In Russia the coefficient of substitution makes 32.5%^[4], and economists of a RANEPA claim that till 2024 he will not grow up^[5].

Respectively, to compensate a difference by insurance payments, it is necessary to make contributions at least for 7-8% of salary within 15-25 years^[6].

You See Also

• Pensions in Russia
• Pensions in the USA

• Insurance (market of Russia)

Notes