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Improving pension savings investing: The case of Russia

Author

Listed:
  • Alexander E. Abramov

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Maria I. Chernova

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

Abstract
Many countries seek to improve their pension systems by introducing corporate and individual savings plans to address the challenges of demography, social security, and economy. However, the establishing of a long-term, reliable savings system encounters multiple impediments. The retrospective analysis of Russian pension reforms offers some recommendations on solving the typical problems faced by reformers. Thus, in 2002 the Russian pension system was implemented by a mandatory savings pillar, which 20 years later the Ministry of Finance substituted by voluntary savings. As this period appeared shorter than the average life span, this measure proved ineffective in increasing pension payouts for future retirees. The frequent regulatory changes and the shrinking workforce coverage as the state prioritized the welfare of the current pension recipients also infringed upon the interests of future retirees. Pension savings investments were further affected by the economic policy aimed at the minimal return requirements which resulted in a more conservative asset allocation strategy and inefficient active management in non-state pension funds. The study demonstrates that policy actions to overcome these impediments and to raise the replacement rates for future retirees should include (a) steady regulations within a pension savings system of no shorter than 40 years; (b) the savings pillar covering no less than 80% of the workforce; and (c) the asset allocation strategy involving a bigger share of equity, longer time horizon and clear benchmarks. These recommendations can be applied to emerging market economies concerned with improving and reforming their pension systems.

Suggested Citation

  • Alexander E. Abramov & Maria I. Chernova, 2024. "Improving pension savings investing: The case of Russia," Russian Journal of Economics, ARPHA Platform, vol. 10(1), pages 34-59, March.
    • Handle: RePEc:arh:jrujec:v:10:y:2024:i:1:p:34-59
    DOI: 10.32609/j.ruje.10.115594
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    More about this item

    Keywords

    non-state pension fund mandatory pension savings replacement rate pension savings portfolio.;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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