Russia Looking for Pension Alternatives Amid Budget Crunch

2015 marked the third consecutive year Russia had held back its pension contributions to plug holes elsewhere in its budget.

Now, the country is considering alternatives to the pension system currently in place; an overhaul could be announced by November.

From Bloomberg:

The central bank may announce the alternative to the current pension savings system within a month, Sergey Shvetsov, first deputy central bank governor, told reporters in New York on Wednesday. Russian non-state pension fund managers need to decide whether they want to continue on their own or consolidate to remain profitable, he said.

With a deficit forecast to widen to 3.3 percent of gross domestic product this year, officials are locked in a debate on measures to fill the budget holes that may include increased borrowing, spending cuts and higher oil taxes. The government commission for budget planning had decided to divert savings from future retirement plans in 2016 to meet budget needs, for a third year in a row, RIA Novosti reported on Wednesday, citing the head of Russia’s Pension Fund Anton Drozdov.

“The new system can’t be entirely voluntary,” Shvetsov said. “In any case there’ll be some kind of encouragement for either people or companies to set money aside for non-state pension funds. We’re trying to formulate an alternative that would be less costly for the budget but not less effective in terms of the size of the funds attracted from the population.”

Russia recently altered its pension funds’ investment policy, allowing (and urging) funds to invest more money in domestic corporate bonds.