Roadmap for the New Pension Reform

Abstract

The paper suggests measures aimed at raising efficiency and long-term sustainability of the pension system. Pension contribution rate, amount of budget transfer to the pension system, and total size of pension benefits in percent of GDP are found to exceed substantially levels typical for the OECD countries and emerging markets. Our major " bottleneck" is very low by international standards support ratio (i.e. number of contributors to pension fund per pensioner). Increase in the retirement age by 2 years for men and 5 years for women would bring life expectancy at retirement in Russia to the level typical for emerging markets. Provisional gain of the budget from this measure is estimated to vary from 1.4 to 2.3% of GDP. The objective of higher retirement age should be not budget gains but stabilization of replacement rate under forthcoming demographic crisis. Other measures suggested include in particular restoring basic pensions, fixing own sources of funds for each of the pension system tiers, and building barriers for running pension imbalances, and fostering late retirement for working aged.