Next year the Russian government plans to introduce individual retirement capital, an “innovative measure” that will increase the efficiency of the country’s pension system, Vedomosti reports quoting World Bank experts.
The experts of the international organization argue that the system is to prevent drastic decrease in the income replacement ratio for pensioners. Specifically, Russia made a decision which is unique in the world and it is to gradually increase the contributions to 6%. This will allow Russians to get accustomed to the new system, the World Bank believes. Voluntary contribution systems with automatic subscription are a good opportunity to maintain wealth of future pensioners – although it requires widespread coverage. Earlier it was reported that the system will be used for citizens with high income of over RUR 85,000 ($1,290).
It is expected that the individual retirement capital will replace the defined contribution system as soon as the next year. Invest Foresight earlier reported that Central Bank Governor Elvira Nabiullina said that the individual retirement capital will “give a new lease of life” to the pension system. It will replace the contributory pensions that have been frozen for several years now. The individual retirement capital will not only include employers’ contributions but personal contributions from future pensioners. The money will be protected by the pension savings guarantee system.