Editorial: Putin wont steal our pensions — Gazeta.Ru

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Editorial: Putin won't steal our pensions

20.04.12 21:26 By Gazeta.ru editorial

None of the pension reform variants will decrease state expences Photo: ITAR-TASS

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It's doubtful that current and future retirees will accept any initiatives directly or indirectly reducing their pensions. Especially when our state increases military and police expenses and pays for funny games like the winter Olympics in the sub-tropics.

Although the word "Strategy" is one of the most popular words in our officials' vocabulary, their real actions are usually provisioned, not by far-reaching plans, but almost exclusively by today's needs. The declarations of new urgent pension reforms, as if we hadn't had enough in Putin's era, were not voiced because of sudden revelations on how the demographic situation will get worse in the next 30 – 40 years. This is a banal irritation because the federal budget has to help Pension Fund with a huge amount of money. The authorities think they could put it to much better uses.

In 2010, when Putin gloriously increased the pensions and the insurance payments to Pension Fund remained the same, the transfer from Federal budget to PF was 2.65 trillion rubles (almost $100 billion, or 26% of all budget expenses.) The government had to think of something urgently.

In 2011 they thought they had found a way to salvation. The insurance payments to PF were sharply increased and the transfer was reduced to 2.34 trillion rubles or 21% of all federal budget expenses. But then the government suddenly found out our economy cannot bear the burden of these insurance payments and they were lowered, if not to previous levels.

That's why this year the federal transfer will be as large as 2.89 trillion rubles (23% of federal expenses), and the next, 2013, 3.15 trillion is planned (and it will be 23% of federal expenses). That means that only half of Pension fund expenses are covered by insurance payments, and the other half will be provided by federal budget. Also, during the last months the government understood it couldn't increase the insurance payments as it had planned for 2014.

After that, those in power decided to reform the pension system radically.

They had to wait until after the presidential election before making these plans public – after all, Putin promised to increase pensions and not to increase retirement age.

Today we know several variants of the reform, but it's clear that the Kremlin hopes to decrease its financial obligations towards senior citizens as fast as possible. Later we'll talk about if this scheme is naïve. But first we need to find out if the problem of cutting down the pension expences is so important for Russia.

The general expenses of the Pension Fund are approximately 9% of our country's GNP. This money is distributed between 57 million people who receive pensions and welfare in many forms including 40 million retirees of whom, for example, 3 million do not have work record and receive social pensions, and 4 million receive pensions on disability or the loss of breqadwinner.

Pension fund will receive about 5% of GNP in insurance payments.

It's less, but not radically less than the general volume of common working pensions paid to those who had paid such insurance payments (even if indirectly, through the enterprises were they worked).

So if we separate the system of state welfare that must be financed through federal or local budgets, and also the increased payments for several privileged groups, say, the state official from the common pensions, there will be no catastrophic disbalance between the insurance fees collected and workers' pensions paid.

And it would be strange to look for the schemes, destroying this disbalance by cutting the workers' pensions financing. Even more strange in the country that has the third-largest military expenses in the world, organizes the most expensive Olympics in history, supports more military men, policemen and security agencies officers for thousand citizens than any other large country in the world, and also radically increases their salaries. There's not a single chance retirees and those who are going to retire one day will support measures cutting their pensions.

The real issue is not the decreasing the part of pension expenses in Russian GNP but their rationalization. Most of 55 or 60-year-olds are still able to work and do so for several years, while receiving their pensions. 10 – 11 million people retired prematurely, while remaining able to work and continuing working and receiving pensions.

Our low pensions are explained, among other reasos, by a large share of pensioners in our population, compared to western European countries who have very large number of senior citizens.

If we gradually limited the number of pensioners to those who really retired, conserving or even increasing the money allotted for pensions, we could increase the worker pensions significantly, finance the system of senior citizens' care even the population continues to grow older.
But radically change the pension scheme only in the atmosphere of mutual trust. It's possible when people are ready to accept or chose an acceptable variant, not when they become subjects to propaganda campaign. A few years ago we experienced one of those, when old men praised the coming benefits monetization from TV screens. To conduct rather unpopular reform successfully, the power must be responsible and respectful towards the people.

If it's not like that, here's what happens.

There are at least three pensions projects. Alexei Ulyukayev, first deputy chairman of Central Bank has published the most radical one. His manifesto, almost hysterically calls for the cancellation of insurance fees (a tremendously generous gift to businesses) and offers the budget to pay not exactly pensions but a social welfare the size of minimum subsistence level. That's very good for economy captains, rather good for the federal budget, who will spend less for welfare than it spends now for the transfers to Pension Fund (especially if the poverty line will be drawn by state statistics agencies).

But tens of millions of senior citizens will turn into pariahs by this reform. They will either have to live half-hungry or be supported by their children.

It's too unacceptable for people for this project to be put to work. But it gives us a basis for discussion.
At least the two competitive projects, one by the Ministry of Health and Social Development, other by the Ministry of Finance, look humane by comparison.

The first project fits best into Putin's promises not to increase the retirement age. You can arrange pension at the age of 55 – 60, as now, but only a really small one, like Ulyukayev's welfare.

And to get a livable pension (approximately of current level) you'd have to work much longer and have a formidable working record. That means that the retirement age will be increased but the president could assure us that it is exactly what he meant when he said that there's no need to interfere with people who want to work more.

As it is, the health ministry project is not bad and not devoid of reasonable ideas, like to increase the taxation of the factories that do not reform the harmful production lines and encourage early retirement.

But what really harms the plan is the wish to cut pension expenses at any cost, which is felt all through the project, as well as the mistrust to the unpopular minister Golikova, wide-spread among the people.

The Ministry of finance project is less complicated and reminds one of the German pensions system, working rather reliably. Pensions in Germany are financed mainly from the insurance fees with rather modest transfers from budgets. The retirement age can be increased (as it is being now from 65 to 67 years). Most of the retirees stop working, those who continue receive a smaller pension.

The Ministry of Finance offers something like this for Russia, recommending an increase in retirement age to 63 years by 2030 and to cancel or decrease pensions for working retirees. There's one difference.

A German retiree's pension is at least two thirds of his salary (and they increase the retirement age to conserve this proportion), a Russian retiree's pension is only one third. The Ministry of Finance's scheme, like the one of the Ministry of Health, has in mind to cut the state pension expenses.
All this internal controversy and badly masked catches will quickly appear when the reform passes through all the official organization and also during the "Public discussion".

The Kremlin will quickly understand that even the most niggardly pension reform won't benefit the budget quickly. And our bosses are not used to thinking about what happens in ten years, their planning horizon is not that large. Any bends are possible on this road.

And the people, always sure that the authorities lie always and always try to rob them, will resist any pension reform, discarding even the reasonable things in it.

The intelligent compromise would be that the retirement age (work record) would gradually increase but the GNP share of pension financing won't decrease. There's a question of how can we reach this compromise.

In Vladimir Putin's power system there is simply no power putting public interest higher than the lobbying, and there's no procedure allowing the authorities and the public to work on common decisions.

— 20.04.2012 21:26 —
	Editorial: Putin wont steal our pensions Its doubtful that current and future retirees will accept any initiatives directly or indirectly reducing their pensions. Especially when our state increases military and http://www.gazeta.ruopinions/2012/04/20/a_4558121.shtml