The present pension system in Russia: Funding and regulations

Abstract

The great changes that affected the political and economic spheres in the ex-USSR led to a complete reform of Russia's social security system. Two main factors are to be considered: i) the dismantling of the old economic structure, especially administrative controls over prices and pay, with a subsequent restructuring of income distribution and ii) the transition to a new economic structure which implies a temporary cut in the purchasing power and standard of living of a large part of the population, especially the more vulnerable groups such as pensioners. Social security and welfare are issues of paramount importance. This is clearly shown by the growing impact of welfare expenses on national income and the social expense for consumption (see Table 1). The cost of welfare is growing also because the average age of the population is rising; the total number of people entitled to receive pensions is growing (see Table 2); and welfare is expanding its scope, improving its standards and including new forms of security. Table 1 shows that the incidence of welfare spending over domestic income and social consumption funds rose from 6.8% and 36.3% in 1960 to 12% and 42% in 1989 respectively. Over the period covered by the data, welfare spending increased almost eightfold a t a faster rate than that of national income. In the period 1980-1989 the population in the USSR grew from 266.6 to 288.6 million, that is a 8.3% increase while the number of pensioners grew from 50.2 to 59.7 million people, an 18.9% rise. This is the political, social and economic background against which the Republic of Russia took its legislative moves to completely reform its pension system. | t tackled the questions of elaborating better regulations and funding wider pension rights and higher payments to the individual. The present paper discusses some important aspects of Russia's Pension Fund; its legal innovations with respect to the old Soviet system and the condition of the Fund a year after its introduction.