Russia Likely to Freeze Pension Contribution For Third Straight Year

Since 2013, Russia has frozen about $3 billion in contributions to its pension system, choosing instead to divert the money to the country’s general budget.

Russia is likely to freeze its next contribution in 2016, according to a survey of economists conducted by Bloomberg.

From Bloomberg:

The cabinet will opt to divert savings from future retirement plans to meet pension obligations in 2016, similar to the measures used to pay current retirees since last year, according to 17 of 23 economists surveyed by Bloomberg. Four analysts said the government will restore the flow of cash to private and state pension managers that was in place before the freeze in 2014, while two forecast a move to do away with mandatory contributions.

The government, at risk of running its biggest budget deficit in five years, is divided over the fate of the pension savings that are primarily invested in Russia’s $529 billion government and corporate-debt markets.

“We hope that it’s just temporarily,” said Gunter Deuber, head of central and eastern European research in Vienna at Raiffeisen Bank International AG. “But we have substantial fears that at some point down the road, the government will scrap the savings component completely.”

Russian officials are weighing whether to shut down the country’s mandatory defined contribution plan and shift to a voluntary plan. Officials told Bloomberg that a decision will be made over the summer.