“Pension case”: year of most high-profile reform of 2010s

World Cup did not help the rating of the government and the president

A year ago, Russian Prime Minister Dmitry Medvedev introduced to the State Duma a bill (Draft Federal Bill No. 489161-7 “On amendments to certain legislative acts of the Russian Federation on the appointment and payment of pensions”), providing for a gradual increase in the retirement age for the majority of citizens from 1 January 2019 — so the pension reform began.

The draft was intended to increase the retirement age from 60 to 65 years for men (for 2019-2028) and from 55 to 63 years for women (for 2019-2034). In this version, a month later, the State Duma adopted the bill in the first reading. However, the majority of Russians were, at most, dissatisfied with this initiative.

According to the polls in the last summer and autumn, which passed amid protests of the population, from 75% (Public Opinion Foundation, FOM) to 90-92% (Levada-Centre and Romir) of Russian citizens sharply negatively reacted to the pension reform. The share of supporters of the reform did not exceed 10-11%. At the same time, the rating of both the government and President Vladimir Putin fell. The activities of the Medvedev's Cabinet in December 2016 were approved by 61% of VTsIOM’s respondents, by the beginning of summer — 45,4%, by the end of June — 38,5%. Putin's electoral rating fell from 66% in March 2018 to 54%. The president’s attempt to distance himself from the reform also did not help: he assured that the decision on it is taken by the government, and during the televised question and answer session with the president on June 7, he actually evaded an answer to the “pension question”.

The announcement of the reform in the midst of the World Cup did not help to reduce the degree of indignation of Russians. Russian Finance Minister Anton Siluanov, one of the ideologists of the reform, subsequently claimed that the government, in announcing the reform in the days of the start of the World Cup, “did not do it deliberately ... it was a coincidence”. However, according to a number of experts, two-thirds of Russians believed that before the presidential elections (March 2018) “there was a deliberate understatement of the problem by the authorities in order to avoid Putin's defeat” — indeed, before, during and after the elections, there was actually no discussions of a pension reform (the survey by Rosbalt dated July 17, 2018).

Last December, VTsIOM published the survey data, according to which the increase in the retirement age of the Russians was assessed as “the main event of 2018”.

The “unity” of the left and the right, calls to sell Pension Fund buildings and unrealized referendum

The discontent of Russians expressed itself not only in the petition against reform (the petition to the president of the Russian Federation, the authorities and the State Duma “Do not to raise the retirement age!” by the time it was closed last autumn was signed by almost 3 million people), but also in street rallies — despite the ban on mass public protests during the World Cup in the cities of the championship. What is more, both the left (Communist Party, Fair Russia) and the liberals (Alexey Navalny, PARNAS) and conditional right (LDPR) were bringing people to the streets.

Especially mass demonstrations were in July (July 28, thousand-strong rallies against raising the retirement age were held in several Russian cities, including Kazan) and September. The Communists submitted an application to the Central Election Commission of Russia to hold an all-Russian referendum, which, due to bureaucratic delays and, according to the initiators of the plebiscite, deliberate opposition from the CEC “did not take off”.

The most striking was the “slogan” of business ombudsman Boris Titov, who said that “one of the main reasons for the lack of funds for the payment of pensions in Russia are excessive and meaningless expenses for the maintenance of the Pension Fund of the Russian Federation” (100k employees, luxurious branch buildings), which cost 1,5% of all pension savings. Titov proposed to liquidate the PF, transferring its functions to the Treasury. Some hotheads generally offered to sell the PF buildings under the hammer. There were also calls to introduce a progressive taxation and impose additional taxes on oil and gas companies.

How Putin “made a discount”

The authorities heard the people — but partially and not everything. By the end of August 2018, the bill received about 300 amendments, and Vladimir Putin made an appeal to the citizens, proposing to raise the pension bar for women not to 63, but to 60 years, “surprising” that the government increased the retirement age for women not by 5 years, as for men, but by eight. In addition, the president proposed to those who is to retire under the old legislation in the next two years to establish a benefit — the right to issue a pension six months before the new retirement age, and to introduce “administrative and even criminal liability for the dismissal of employees of pre-retirement age” (pre-retirement age — 5 years before retirement).

It should be noted that the first and most part of the appeal was devoted to explaining the need for the pension reform, which is long overdue — otherwise the pension system will “crack and finally collapse”. A friendly tone in the appeal was telling about the “soothing” nature of the speech: the phrase “Dear friends!” was used four times.

...but refused radical proposals of the dissenting

Putin assured that since 2000 he had always been against a pension reform as the economy of the country and welfare of citizens at that time weren't ready to it. The need for the reform, he reminded, was discussed already “in the Soviet period, as well as in the ‘90s — but decisions were not taken, for one reason or another they were postponed.” But the time has come, we cannot delay.

Putin criticized offers of dissenters. According to him, the sale of PF buildings would give the budget 120 billion rubles, which would be enough only for the six-day payment of pensions, then the money would end. About the same amount can be given by the application of an increased income tax rate, “for example, 20 per cent to high incomes”, he calculated. Taxation of the fuel and energy complex will allow “feeding pensioners” for no more than two months.

Pension reform hit the party in power at the elections

Despite the September protests, the bill was passed with amendments by Putin and United Russia Party in the second reading on September 26 — while the entire block of amendments from opposition parties and trade unions was rejected. The third reading took place at the end of September, October 3, the bill was approved by the Federation Council, on the same day it was signed by the president — and after the official publication it gained the force of law.

The enormous social tension due to the pension reform, however, hit the authorities during the September elections: it is believed that it is because of it in the three regions where the elections of governors were held — in Vladimir Oblast, Khakassia and Khabarovsk Krai — the candidates from the United Russia lost the second round of the elections, and in Primorsky Krai, where the second round was won by the candidate from the United Russia Andrei Ishchenko, the election results were cancelled with a scandal. At the same time, the ruling party lost the elections in the Legislative Assembly of Khakassia, Irkutsk Oblast and Ulyanovsk Oblast. Expert Community Coordinator of United Russia, Chairman of the Board of the Civil Society Development Fund Konstantin Kostin estimated the negative effect of the pension reform at 20% of the result of the elections.

The protests, though on a smaller scale, continued until the end of the year. Those dissatisfied with the increase in the retirement age and the opposition in general claimed that the media, especially the federal, after the mass protests in July last year gradually refused to use in their broadcasts “provoking words ‘raising the retirement age’, replacing them with ‘the draft bill on pension reform”. Then they allegedly refused the word “reform” as associating with reforms of the 1990s, having replaced it with softer phrases “the pension draft bill” and “pension changes”.

What opponents and supporters of the reform say in their defense

No matter it is reform or not, but it began in January 2019 and should be fully completed by 2034. However, consensus on it in the society has not yet developed. The critics of raising the retirement age indicate that a significant proportion of, for example, men today do not live up to retirement age, and offer instead to stop the reform of illegal employment: according to their calculations, only 44 million out of 77 million workers pay in the FIU, the rest work informally.

The supporters also rest on that without raising the retirement age in the country very soon there will be no money to pay pensions — because of the demographic pitfall of the 1990s. They also note that, according to official data of Rosstat, the life expectancy of men in 2017 was 67,5 years (for women — 77,6), it should reach 68 years by 2021 — the opponents of raising the retirement age do not believe in official statistics, considering it too overstated. According to Rosstat, by 2035 when the pension reform is completed, the average life expectancy of men in Russia is to be 70,3 years (of women — almost 80 years). In Tatarstan, by the way, according to the regional division of Rosstat, life expectancy is higher — in 2016 it was 68,2 years for men and 78,8 years for women.

According to the May Decrees» of the president of 2018, the forecasts of Rosstat on the increase in the life expectancy of Russians should be provided through the implementation of a number of national projects. Already in 2019, the improvement of life after the reform should be felt by pensioners: according to officials, the FIU will save up to 800 billion rubles, 700 billion rubles of which will be used to increase pensions for those who have already become a pensioner (indexation is to be 7%).

One pension reform “froze” the other for a year

Mass reaction of citizens to one pension reform became the reason of temporary freezing of another. Last year, a public discussion of the concept of individual pension capital (IPC), which would modernize the funded pension (the amount of contributions, according to the second reform, would gradually increase from 0% in the first year of connection to the system, until it reaches 6%), was to take place. Individual pension capital will be launched in January 2020. According to the Ministry of Finance, such a system would bring pensions to the level of 60% of the previous salary (today — only 40%). But Anton Siluanov's office planned to publish the plan for the transition to the new system in August 2018.

But the second pension reform has actually started recently. This week, Vladimir Putin approved the transition to the system of individual pension capital, again making changes to the bill. Initially, the authors of the new pension model — the Ministry of Finance and the Central Bank — assumed that citizens with savings would have to connect to the system automatically, and it would be possible to refuse it only by submitting an application. The president refused the Ministry of Finance in the automatic character, making the system voluntary. The bill is planned to introduce to the State Duma by the end of June or July.

The government of the Russian Federation noted: “In order for the IPC to cease to be associated with the unpopular reform to raise the retirement age, there is an idea to promote it as a new financial instrument that allows you to save for the future.” The fact that the Kremlin is still concerned about the outbreak of protests over the pension reform can be judged by the April rumours that the Pension Fund could be headed by Valentina Matvienko (let us remind, the material in Kommersant about this led to a conflict with the owner of the publication, Alisher Usmanov, and the dismissal of the policy department of the newspaper in full): the ex-speaker of the Federation Council would have enough political weight to “beat back” the dissatisfied and try to make one of the most at the moment unpopular institutions a more or less respected agency.

Two-thirds of Russians are not ready to make additional pension contributions

Against this background, Levada-Centre published in early June the results of a survey of Russians, showing their unwillingness to the pension saving reform: almost two-thirds of respondents (63%) would not want to make additional contributions to the non-state pension fund in addition to the mandatory contributions that the employer already makes. Only 19% of the respondents expressed the desire to allocate an additional 1% to 5% of their income to a funded pension, 10% are ready to deduct 6% or more of their income.

According to experts, the share of Russians who do not want to make additional contributions to retirement, for example, coincides with the share of those who have no savings (65%). The median income of families in Russia is within 24,400 rubles (Rosstat data), which simply does not allow to accumulate these savings.

In addition, most Russians have developed distrust of the pension system as such. The rules of the game in it are changed too often.