Tatarstan residents dash to Moscow Exchange for tax deduction

09:00, 21.02.2020

The number of individual investment accounts in the republic suddenly increased over a year — 2,7 times

After a twofold fall in deposit rates, Tatarstan residents began to express interest in alternative exchange tools. The number of individual investment accounts (IIC) of Tatarstan residents on Moscow Exchange doubled over a year — to 43,200, the regional office of the Central Bank said on 18 February. And this is still “little for Tatarstan”, key strategist at BCS Maksim Shein evaluated the republican residents’ amount of investments in a talk with Realnoe Vremya. In his opinion, the potential is much bigger. Meanwhile, the total sum of investments of Russians on brokerage accounts in 2019 was 2,7 trillion rubles, of which 150 billion are brokerage IIC, NAUFOR — the biggest Russian association of professional securities market players — calculated.

CB: threefold inflow of Tatarstan IIC on exchange

The number of advanced exchange investors grows in Tatarstan. Residents of the republic opened 43,200 accounts by late 2019, the press service of the Tatarstan office of the CB said on 18 February. According to the press service, there has been almost a threefold inflow over the year. Previously, Tatarstan residents had just about 15,000 IIC. “The number of individual investment accounts increased 2,7 times — to 43,200 — in 2019,” reads a message of the Tatarstan office of the CB citing Moscow Exchange’s data.

Tatarstan accounts for 12,8% of IIC in total that opened in the Volga region. However, the amount of money deposited by Tatarstan residents isn’t specified.

“There has recently been observed individual investors’ interest in the stock market: financial tools, indeed, can be a more profitable alternative compared to bank deposits,” noted manager of the office — the Bank of Russia’s National Bank in the Republic of Tatarstan — Marat Sharifullin. “The IIC allows a citizen to not only diversify his or her savings but also receive a kind of bonus from the state — tax deduction. At the same time, one should be careful about one’s savings because this way of investment doesn’t guarantee profitability, while money on the account isn’t insured by the state.”

State stimulates with rubles

A surge of registration of IIC on the exchange happens, as a rule, at the end of the year, in December. In this case, investors hope to receive a profit in several months — in April. According to BCS’s key strategist Maksim Shein, IIC gives its owner a chance of receiving 13% tax deduction in spring. An account with any sum is created for three years, but the biggest amount for tax deduction is 400,000 rubles (that’s to say, the deduction will be 52,000 rubles).

“IIC is one of the few tools to multiply savings that is supported by the state,” Shein noted in a talk with Realnoe Vremya. “This is how the citizens’ investment activity is stimulated. It is no secret that a huge amount of money is located on bank deposits. Precisely for this reason investments aren’t made in the stock market. But to make the IIC popular, the state supports them with the ruble. IIC owners enjoy tax concessions. Even if you opened an IIC and invested in nothing, and money is just there, you will anyway receive 52,000 rubles as tax concession every year.”

Such investors are called passive, and they are the majority. Moreover, the profitability of investments in IIC is 13% a year, which is much more than in bank deposit where rates fell to record-low 5% a year.

How to get 39% a year in a month

As it was already said above, many understood that it is more profitable to open an IIC not at the beginning but the end of the year because it doesn’t matter when the individual account was replenished, analysts noted. The state will anyway return the tax deduction only next year. So the profitability of a deposit made in December will turn out three times higher than in January. It should be reminded that IIC is a special account for transactions with securities that a natural person can open. Moreover, one person can have only one IIC. Investments can be made only in rubles, there is no minimal amount, the biggest investment is a million rubles a year (however, there is no sense for a passive investor in overpaying over 400,000 rubles — it is the cap for tax deduction).

“43,200 IIC are little for Tatarstan,” Maksim Shein notes. “Why? It is like in the famous phrase: ‘It is too much for Athos but too little for La Fère’. I think that every person must have an IIC. One can sit and wait for interest on a deposit account, but what is the sense? Deposit rates will keep going down. The era of deposits is coming to an end now, and people are looking at investments more. It is correct. There will be more accounts. However, about 2/3 aren’t funded now, that’s to say, there is no money for them. People opened them but don’t do any operations. And Tatarstan investors are careful like others because it is a new business.”

NAUFOR — the biggest Russian self-regulatory organisation of professional securities market players — conducted a traditional survey of leading brokerage and managing companies servicing natural persons on exchange in early 2020. According to it, the amount of money, the total sum of investments of citizens on brokerage accounts in 2019 was 2,7 trillion rubles, of which brokerage IIC were 150 billion rubles. NAUFOR claims that a sudden rise in the number of brokerage accounts is accompanied by a reduction in the share of funded accounts. The share of funded brokerage IIC accounts in 2019 amounted to 27%, that’s to say, only one in three accounts are replenished.

Number of IIC can grow by 30-50%

“According to statistics as of December 2019, about 952,700 people work in enterprises and organisations in the Republic of Tatarstan, they all can potentially receive the A type of deduction of IIC. And it is only considered workers and employees who have income tax. How many people are there who have savings but don’t invest? This is why 43,200 open accounts are, of course, not a high level yet. This number must grow,” analyst of FINAM GC Yulia Afanasyeva agrees with Shein.

According to her, the republic’s residents are so far not familiar well with this investment opportunity. Though IIC could also be used to create a fund of pension savings. “When IIC was created, the pension programme didn’t exist (guaranteed pension plan), and it was important for the state to push the population into creating a safety cushion when they get old.” The cap for IIC can be raised to 2,5 million rubles a year (such plans can be performed this spring already).

In this case, in Afanasyeva’s opinion, the number of accounts might grow at least by 30-50%: “I think this is quite possible. There is necessary infrastructure and it is approximately 22 times bigger than the current number of open IIC. The IIC development history has already has sudden surges, the situation can repeat.”

Banks: deposits without risk

Meanwhile, banks advocate the conservation of money on deposit accounts. Yana Bezrukikh, the executive director, head of the Department of Analytics and Deposit Portfolio Management at Renaissance Credit, warns that amid a backdrop of falling deposit rates, of course, many begin to have a desire to invest in other tools that can provide a potentially higher profit.

“However, one should keep in mind that such investments carry certain risks — one can not only earn money but also lose some. This is why when creating one’s investment portfolio, stick to a conservative approach having put a significant amount of savings on a classic deposit account whose profit can at least partially cover a loss of riskier investments in case the stock market collapses.”

Bankers consider that a deposit remains “an excellent option to create a financial safe cushion. Up to 1,4 million rubles on a deposit account are secured by the state”. According to the CB, the amount of the population’s money banks received in 2019 increased by 7,3%.

“The population’s literacy in investments gradually increases”

Over 500 IIC opened in branches of the brokerage company at Otkritie Bank in Kazan and Naberezhnye Chelny in 2019. The bank doesn’t name its clients’ profit and the total sum of funding.

“The Central Bank of Russia lowered the rate several times in 2019. In total, it was lowered by 150 basis points — from 7,75% to 6,25%. Due to this, the profitability of deposits fell from 7,5-8,0% to 6,0-6,5% and keeps going down. Of course, it isn’t the most pleasant fact for the population. Many realised the necessity of more active money management. The number of brokerage accounts on Moscow Exchange in 2019 almost doubled — to 3,5 million. The quantity of individual investment accounts grew suddenly too and approached 1,5 million by the end of the year. The number of inflow of money to brokerage accounts also prove that many citizens have been long dissatisfied with the profitability of bank deposits. Meanwhile, one can see profitability at 6,0-9,0% in the market with quite a high reliability level. In fact, investing 400,000 rubles in federal loan obligations through IIC, citizens can receive about 10% of profit without any risks,” Vadim Lozhkin, director of the brokerage company at Otkritie Bank in Kazan, told Realnoe Vremya.

The expert notes that the population’s literacy in investments gradually increases, new platforms and ways of account management appear: “In fact, a brokerage terminal can be now carried in the pocket if an app is installed. Today one even doesn’t have to go to the office of the brokerage company to start investing”. According to him, brokers increased responsibility to clients too because the availability of possibilities of control almost excludes any cases of manipulation.

By Luiza Ignatyeva

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