The Dynamics of Individual Retirement Strategies in Russia (2005-2012)

Abstract

Olga Kuzina — Professor, Chair for Economic Sociology; Senior Researcher, Laboratory for Economic and Sociological Research, National Research University “Higher School of Economics”. Address: 20, Myasnitskaya St., Moscow, 101000, Russian Federation. E-mail: kuzina@hse.ru

In 2012 only 7% of non-retired (working age) Russians were assured that their state pension would be sufficient for maintaining a normal life during their retirement period. Another 26% were only partially assured. And although these respective shares reached their maximum in 2012 (since 2005), most working age Russians are still unconvinced that they will have sufficient compensation after retirement. In order to cope with this expected lack of income, half of the currently non-retired Russians (49%) expect to continue working. The relationship is as follows: the closer the retirement age, the higher the percentage of those who think about continuing working in retirement. This pattern is more common among the most affluent groups and residents of larger cities. The percentage of those who plan to continue working after retirement has increased only by 6% since 2011. Retirement savings as a method of accumulating funds for retirement have proven to be rather unpopular: in 2012, only 11% of Russians of working age expected to live on their personal savings or non-state pensions during their retirement. Since 2005, the strategy of investing in retirement savings has become more widespread, but it is still much less popular than the strategy of postponing retirement and prolonging the working period. And these expectations seem to correspond with the current reality. From 2005-2012, the proportion of working pensioners increased from 10% to 32%. This corresponded to the decrease in proportion of pensioners, who resort to self-provision: from 13% to 1% (as a share of total number of pensioners). Savings or income from private pension systems are being used by no more than 1% of pensioners, and just as many receive their income from various rents.

The awareness of the state program where employees can make additional voluntary contributions to private pension funds and receive an additional investments from the state is quite high: in 2009, 49% knew about it, and in 2012, this number increased to 63%. However, the proportion of those who actually participated in this program did not increase significantly from 2009-2012 and accounted for only about 5% of the working population. Two major reasons for abandoning this strategy were: 1) the lack of trust to private pension funds (54% in 2012) and 2) the lack of personal income to make such investments (32% in 2012).