The financial ombudsman proposed to discuss the individual retirement age

The current system of mandatory pension insurance in Russia needs to be improved, says Yuri Voronin, Financial Ombudsman.Among his proposals are the individualization of the retirement age and the revision of the pension formula.

The Russian system of mandatory pension insurance needs to change certain principles - in its current form it does not fully meet the current realities of the labor market and demographic changes. This opinion was expressed by Chief Financial Commissioner, Head of the Center for Legal Support of Socio-Economic Reforms of the Institute of Legislation and Comparative Law under the government Yuri Voronin at the St. Petersburg International Labor Forum, which was held in March.

The spread of new forms of employment (in particular, the self-employed), the aging of the population, the robotization of labor, the gap between the poor and the rich are becoming challenges for national pension systems. The current system of compulsory pension insurance (OPS) in Russia either needs to be changed to another one or modified, follows from Voronin's presentation, which he presented at the forum.

Alternatives to the OPS are the replacement of the current solidarity-distributive system (when today's workers pay pensions for the older generation with their contributions from wages) to an individual funded system or the transition to an unconditional basic income system (when the responsibility for paying pensions lies entirely with the state). An attempt to introduce a funded system in Russia was unsuccessful (funded pensions have been frozen since 2014, a new project of the Ministry of Finance and the Central Bank has been postponed since 2019), and society is not yet ready for an unconditional basic income system, Voronin is convinced.

Therefore, he considers the transformation of the current model for the formation of pensions to be the optimal response to the challenges. In his opinion, Russia should abandon the single retirement age for all, and the pension formula should become understandable and transparent.

How is it proposed to change the pension system

The system of compulsory pension insurance, based on the principles of solidarity, can work for another 50-70 years, the financial ombudsman believes. But for this, in his opinion, it is necessary to make the following changes to it:

Provide an additional source of funding for the pension system.It can be the profit fund of companies along with the traditional source - the payroll fund. This is necessary to compensate for the loss of income of the pension system due to the automation of production processes (what people used to do by transferring insurance premiums, robots and artificial intelligence will do in the modern world).USA Review the pension formula. It is necessary to switch to an internship-earnings formula (to establish a clear dependence of the size of the pension on the length of service and earnings) or to keep the point formula, but with an objective and actual value of the point. In 2018, Deputy Prime Minister Tatyana Golikova, who oversees the social sphere, announced her intention to abandon the point system that has been in place since 2015, but this has not yet happened. Index pensions in proportion to the growth of income sources in the economy, but not below inflation, if their profit is not large. Now the decision on the amount of indexation is made by the state "in manual mode", where the minimum is the rate of inflation. It does not matter how much the companies have earned and how much the economy has grown. Give the right to early retirement in exchange for a reduction in pension. As Voronin explained, the institution of voluntary early retirement exists in almost all countries that have raised the retirement age. Individualize the retirement age . Options include replacing the unified retirement age with length of service or returning to an individual assessment of disability. Such an assessment existed in the 1920s and 30s, when a pension was given based on the results of a medical examination, which confirmed that a person could no longer work.

“The problem of retirement age can be solved so that it does not cause “allergies”, rejection among the population and does not disrupt communications between society and the state,” Voronin is convinced.

According to the financial ombudsman, another challenge to be addressed in the future is the separation of pension systems for employees and new forms of employment, in particular, the self-employed. “Employees are actually subsidizing the self-employed with their contributions, and there are more and more self-employed people, and this is becoming critical for the pension system,” he said. In November 2021, the head of the Federal Tax Service, Daniil Yegorov, told RBC that the number of self-employed people had exceeded 3.5 million. 

Self-employed people who do not pay insurance premiums cannot count on an insurance pension, but they are entitled to a social pension. According to the PFR, as of January 2022, it is received by 3.3 million Russians who, for some reason, have not worked out enough work experience to receive an insurance pension. From April 1, 2022, social pensions will be indexed by 8.6%, their amount will be slightly more than 11 thousand rubles. The size of insurance pensions was indexed by the same amount from January 1 - up to 19 thousand rubles.

Previously, the government was given the authority to index old-age pensions several times a year without parliamentary approval.

RBC sent a request to the Ministry of Labor. Voronin was appointed financial commissioner by decision of the Bank of Russia in 2018.