RUSSIA - The Russian legal system is hindering the progress of the country’s pensions reforms, according to a minister from the Department for National Health Services and Social Welfare.

Speaking in London yesterday, Yuri Voronin, Russian deputy minister responsible for Russian pension reform, said: “Russia’s legal system means that, unfortunately, we are still unable to legislate or properly regulate the property rights for pension contributions. This area is covered by a liability law rather than common law but in our system the concept of rights of ownership, or property rights of the contributors, is not applicable to the liabilities. Therefore, without a solution to the rights of ownership we will not be able to progress with the pension reform.”

Russia has to introduce reforms to its pension system as its workforce is projected to decline by 14 million people by 2025, according to the Russian government statistics agency Rosstat.

New taxation rules will come into force on 1 January 2010 and several other proposals have been put forward - such as the payment of a lump sum before the funding legislation is adopted, the creation of an annual funding provision in the state pension fund and some kind of agreement regarding the transfer of contributions between the state pension fund managing company and occupational fund managing companies - but no final decision has been made yet.

Voronin said Russia could learn from pension systems in other countries, such as the UK’s, as long as its own different legal system is still taken into account.

“There are systems that have proved their effectiveness in other countries,” he said. “Of course, we cannot just copy them and transfer them to Russia. But maybe we can make use of their mechanisms to some extent.”

Pension benefits are currently fixed and paid equally to all Russian pensioners but will become contributions-related with the development of a national pensions strategy.

The National Wealth Fund was established in February 2008, in a bid to fund the wholesale reform of the Russian pension system.

See Pensions In Central and Eastern Europe in the January 2010 edition of IPE for a report on Russian pensions.

Topics