The Russian government is discussing the possibility of transforming the Pension Fund of Russia into a public-law company.
…initially, [there is a proposal] to create a government body of the [Pension Fund] on a three party basis – with the participation of the State, representatives of the trade unions, and employers.
According to experts, the new legal status would allow the PFR to become more independent from the budget, would give it an opportunity to increase its reserves, and… [invest in] companies for additional profit.
One of RBC’s sources said:
“About a year ago, it was decided to study the possibility of regulating the status of the PFR, based on the norms of the federal law on public-law companies [see link for the text of the federal law in Russian]; the final version [of the bill] is still not available. Discussions continue between the Ministry of Labor, the Ministry of Finance, the Ministry of Economic Development, the trade unions, and employers’ organizations.”
The Chairman of the Federation of Independent Trade Unions of Russia, Mikhail Shmakov told RBC:
“It is impossible to say unequivocally whether this is bad or good, there are pros and cons, but in any case, the first place for management should be three-sided, and then choose the form – public-law company or a joint stock company, this, in fact, is now the conversation [that is taking place]. There are supporters of one option, there are supporters of the second option. A decision has not been made.”
Shmakov stressed that the parties involved in the discussion cannot agree and build a structure that would satisfy everyone and be efficient.
According to the chairman of the PFR Anton Drozdov, the draft law on a three-party management [structure] was prepared by the Pension Fund, but it never went beyond inter-agency coordination. In particular, there was an idea to form a fund management body over the executive body in the form of a system based on three parties: representatives of workers, employers, and the State…
Drozdov told RBC that:
“We prepared this bill several years ago, but then there were different proposals… that the fund should have greater independence, and greater autonomy from the budget in terms of insurance premiums.”
And, he continues, this brought up another issue, “because there were questions about the ownership of these contributions…”
“We have not yet managed to agree… on all the nuances of these divisions, so the discussion will continue next year,” Drozdov said.
The delay might be due to the upcoming presidential “election” that is scheduled to take place in March. Although it seems unlikely that any decision on the government’s part might change the outcome of the election, they may figure it is better to be safe than sorry.
Granting the PFR the status of a public-law company would allow it to start forming and accumulating reserves, believes Alexander Safonov, the vice-rector of the Academy of Labor and Social Relations.
“The pension fund will acquire better opportunities to act independently of the State. The State cannot be extracted from this process anyway, but in this case the Fund would become more independent, has the right to allocate its reserves, [and] increase them. All over the world, one of the ways to overcome the demographic wave of economic crisis is the formation of reserves and… [investing them]… including in foreign [corporations], to obtain additional profit,” said Safonov.
Yuri Gorlin, the deputy director of the Institute for Social Analysis and Forecasting of the Russian Academy of Sciences, says that the Pension Fund does not accumulate reserves. “There are no reserves at the Pension Fund, there are still some remnants. The PFR pays out everything it collects.”
The Finance Ministry and Economic Development Ministry “oppose greater independence for the PFR.”
“The granting of [a new] legal status to the PFR means that it will not be possible to transfer money, spend the Fund’s money on non-target tasks, it will not be possible to withdraw reserves, which the Finance Ministry does not like,” Safonov notes.
According to Safonov, the Finance Ministry considers the Pension Fund to be part of its budget, and has been using the money from it to “plug any holes” in the budget.