The number of pensioners in Russia will increase for the first time in five years

In 2023, the number of Russian pensioners will grow by 1.1 million, and in 2024 , by another 569 thousand. Such dynamics are expected for the first time since the beginning of the pension reform, including due to residents of new regions

In 2023, the number of pensioners in RUSSIA will increase by 1.13 million people, and in 2024 their number will increase by another 568.5 thousand. This forecast is contained in the draft budget of the Social Fund (SFR) for 2024 and the planning period of 2025 and 2026, which was studied by RBC. As a result, in two years the number of pensioners receiving pensions through territorial bodies of the Social Fund will increase from 41.78 million to 43.47 million people - the maximum since 2019.

The number of pensioners will show positive dynamics for the first time since 2018. Since 2019, a gradual increase in the retirement age has begun in Russia in the course of the pension reform. At the same time, according to the reform schedule, in 2023, neither men nor women will retire in Russia .

The increase in the number of pensioners is due to the inclusion of citizens in four new regions, as well as planned shifts in the retirement age, the Ministry of Labor explained to RBC. Pensions for residents of the Luhansk and Donetsk People's Republics, Kherson and Zaporizhia regions according to Russian standards are assigned from March 1, 2023, based on applications from citizens.

How the number of pensioners is changing

Pensioners receiving pensions through the SFR bodies include recipients of insurance pensions (i.e. old-age, disability and survivor's pensions), pensioners under state pension provision (former civil servants), as well as military pensioners receiving an old-age pension.

According to the materials for the Social Fund budget, out of 1.13 million new pensioners in 2023, the majority (1.05 million people) will become recipients of insurance pensions, increasing their total number to 38.93 million people. A similar trend is also relevant for 2024: out of 569 thousand citizens who will be assigned a pension , 496 thousand will apply for insurance (as a result, the total number of citizens in this category will increase to 39.43 million people).

Read PIONERPRODUKT .by The Economy of Poverty: Why Russian Employees Will Become Poorer How to Summarize Any Information in Less Than 60 Seconds Away from the Ticking Bomb: Why Investors Are Selling CHINA Stocks Why Problems Have Begun in the US Logistics Market — The Economist

Social pensions (paid in the absence of sufficient work experience to receive an insurance pension) are expected to be assigned to a significantly smaller number of citizens: 55.6 thousand people in 2023 and 56.5 thousand in 2024. The number of pensioners under state pension provision will increase by 69.4 thousand and 72 thousand (and will reach 4 million people by the beginning of 2025).

The number of military pensioners who also receive an insurance pension will increase by 0.4 thousand per year (up to 781 thousand people). Among them, pensioners in the system of the Ministry of Defense, the Ministry of Internal Affairs, the Investigative Committee and other security agencies are not taken into account.

The number of pensioners in Russia has been declining since 2019, when the retirement age began to gradually increase. In 2020, the decline accelerated amid the covid-19 pandemic . In 2021, the number of pensioners decreased by almost 1 million people, which became an anti-record since the early 1990s. According to the results of 2022, a decrease of 232 thousand people was recorded, RBK wrote.

Geography of new pensioners

By mid-2023, pensions in the new regions have been assigned to 440 thousand pensioners, and approximately 300 thousand more are waiting to apply, RBC wrote, citing calculations by the Ministry of Labor. Of the 1.1 million new pensioners this year, approximately 700 thousand people will be from the new regions, Alexander Safonov, professor at the Financial University under the Government, agrees with the statistics.

"There is a large contingent of elderly people in these territories. There was no increase in the retirement age in Ukraine : women there retired at 55, and men at 60. For them, the transition period of the Russian pension reform will begin next year. In addition, the special operation could lead to an increase in the number of disabled people - recipients of insurance pensions. Among them are both civilians and those who fought, whose status does not equate them with military pensioners (volunteers, contract soldiers)," the expert notes.

In 2023, according to the pension reform schedule, no one retired due to age, Safonov recalls. Up until 2022 inclusive, a special benefit was provided: pensions were assigned six months earlier than the new retirement age. In 2024, women born in 1966 and men born in 1961 will retire.

In 2023, pensions can be applied for by those who previously worked and decided to retire, persons entitled to early retirement under working conditions, unemployed citizens who can be issued an early pension due to the lack of suitable work for a long period. "There could well be 400 thousand of them (plus 700 thousand pensioners in new regions): in Russia, up to 30% of pensions are assigned under an early benefit," Safonov adds.

Balance of the Social Fund budget

An increase in the number of pensioners leads to an increase in the burden on the pension system only if it is not accompanied by a corresponding increase in the number of employed people, from whose wages insurance contributions are paid, notes Viktor Lyashok, senior research fellow at the laboratory for research into pension systems and actuarial forecasting of the social sphere at INSAP RANEPA.

The current growth will not affect the balance of the SFR budget, Lyashok believes, since the number of employed people is also increasing at the same time due to new citizens from new regions.

But Safonov reminds us that in the new regions the ratio of employed and unemployed population is lower than in the rest of Russia. "In addition, the economy there is smaller, salaries are lower and insurance contributions are not collected in the same volume as here. That is, from the point of view of pension provision, these regions are subsidized," the expert says.

The change in the number of pension recipients does not pose a risk to the Social Fund budget: the budget is balanced and provides for the fulfillment of all obligations assumed by the state, the press service of the Ministry of Labor reported.

The budget of the SFR for 2024 was formed with a deficit of 234 billion rubles with revenues of 16 trillion rubles and expenses of 16.2 trillion rubles. Of these, revenues from mandatory pension insurance will amount to 10.5 trillion rubles, and expenses - 10.8 trillion.

The ratio of pensions to the subsistence minimum

The draft budget also calculates such a value as the ratio of the average insurance pension to the subsistence minimum for pensioners (SMP). The ratio of the average annual insurance pension to the SMP will be 160.9% in 2024, 153.9% in 2025, and 147.4% in 2026. At the same time, the ratio of the average annual old-age insurance pension for non-working pensioners to the SMP will be higher: it will be 175.4% in 2024, 168.5% in 2025, and 162.4% in 2026. The subsistence minimum for pensioners for 2024 is set at 13,290 rubles, and in 2025 and 2026, the planned amount is 14,554 rubles and 16,056 rubles, respectively.

Previously, the ratio of pensions to the subsistence minimum actually characterized the purchasing power of this type of income, since the subsistence minimum was calculated based on the consumer basket and showed how many goods and services necessary for life could be paid for. However, in 2021, the methodology for calculating the subsistence minimum changed, and its value was linked to the median per capita income. For 2023 and 2024, due to the outstripping growth of prices, the government deviated from the new methodology and determined the subsistence minimum in a special manner - at the level of the projected poverty lines. Those, in turn, are calculated as the last subsistence minimum determined according to the old methodology (for the fourth quarter of 2020), indexed for inflation. The subsistence minimum for a pensioner is set at 86% of the base.

Taking into account the new methodology, the ratio of the average pension to the subsistence minimum is not an indicator of the dynamics of purchasing power, the press service of the Ministry of Labor stated. "The forecast ratio is not a statistical cross-section. Taking into account the specifics of calculating the subsistence minimum and calculating the average annual pension, this ratio is nonlinear and the comparison of annual values ​​is incorrect," they reported there.

According to the department, indexation is a tool for maintaining or increasing the purchasing power of pensions. It determines how much the amount of payments received by each specific pension recipient will change. From January 1, 2024, insurance pensions for non-working pensioners will be indexed by the inflation rate projected for the current year - 7.5%.

According to the law, insurance and social pensions for non-working pensioners cannot be indexed below inflation. "But the subsistence minimum, according to the new methodology, is tied not to inflation, but to the dynamics of the population's income. Accordingly, the budget stipulates that pensions will grow at a slower rate than wages," Lyashok states.

The problem is that indexation is compensatory in nature, since it is set based on the inflation rate of the previous year, says Safonov. An alternative approach could be to link pension indexation to the growth of wages (this method is used, for example, in European countries). Earlier, Safonov and author Daria Nekipelova made calculations showing that indexation based on wage growth would allow pensions to replace up to 60% of lost earnings. By the end of 2022, pensions on average replaced less than 30% of lost earnings of Russians.