Press Release, November 19, 2013

Today the State Duma is considering a package of bills on the pension reform. YABLOKO leader Sergei Mitrokhin has just made a speech in the State Duma.

The pension reform proposed by the government does not improve the welfare of Russia’s pensioners and even violate their civil rights.

1. In 2012, Vladimir Putin ordered to the government to organise a broad discussion of the strategy for development of the pension system until 2030. Today, according to exit polls, 40 per cent of Russia’s citizens are completely unaware of the reform.

2. There are such unsolved problems in the Russian economy that hinder the development of an efficient and fair pension system. Such problems are as follows: low efficiency of labour, a large shadow sector and considerable hidden unemployment. Any changes of the pension formula will not bring any effect without solution of these problems. The project ‘how best to divide’ is not accompanied by the project ‘how to earn more’.

Here come the key points of Sergei Mitrokhin’s speech in detail:

The proposed reform will lead to the situation when the level of pensions will be the same as that obtained under the present conditions and not envisaging any cardinal changes of the pension system: the average pension in 2030 is expected to total about RUR 33,000 (approx Euro 750). The income gap between the pensioners and the working population will increase. By 2025, when the number of retirees grows up to 45 – 47 million people, the replacement rate will decrease from 34.5 per cent in 2012 to 25 per cent in 2025.

3. The proposed reform will lead to a significant reduction of recipients of non-contributory pensions, as those having under 15 years of work experience and less than 30 points will not get it.

4. Getting higher pensions provided later retirement is introduced, will not help improve pensioners’ welfare, as a five years higher retirement age will pay out only after a ten year period.

5. The task of reduction of dependence of the pension system on transfers from the federal budget is not solved in the proposed draft. The new pension formula will require an increase of these transfers by about 2.5 times by 2030.

6. The complexity of the new pension formula will inevitably lead to the emergence of serious conflicts in every day life. The pension formula should be simple and easy to understand even for non-competent worker. People need to understand what a year of work will bring to the amount of pension.

7. The government’s plan virtually proposes a confiscatory approach to the workers who believed to the state and who have made some retirement savings, as individual coefficients reduced by 25 per cent will be applied to such people.

Confiscation of savings and replacing them with ‘scores’ resembles early 1990s: confiscation of savings and replacing them with vouchers.

Any confiscation undermines trust. In this case, we will face further retreat of the labour market into the shadow economy.

8. All this is aggravated by a gap between the two pension systems, as civil servants’ pensions will be tied to their salaries and pensions of all other citizens to some strange ‘points’.

In view of this we propose to do the following:

1) reject the draft and continue its public discussion,

2) the reform should target at paying pensioners from 40 to 60 per cent of their earnings in line with international norms, but not 25 per cent as envisaged by the government’s draft. These parameters should be bound to the pension formula.

3) eliminate the gap between the pension schemes for civil servants and for all other workers.

4) undertake steps so that to ensure that the Pension Fund would become the largest shareholder in the Russian raw materials companies (Gazprom, Transneft, etc.) and would receive dividends from these companies. Moreover these companies should be made transparent and accountable to citizens.

This goal can be achieved only in an effectively functioning economy and modern political system. This means that the economy should get real property rights, competition and domestic demand, which YABLOKO proposes to expand via its programme Houses-Land-Roads. A modern state means an independent judiciary and division of powers.

However, the government can not and does not want to do anything of this. In such circumstances, there are no real solutions of the pension problem, as well as other key Russia’s problems.