Pension system: what Russians should expect in 2018

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09 january 2018

A number of events and modifications essential for all parties to the mandatory pension insurance system, including current and future pensioners, will take place in Russia’s pension system in 2018.

Rise of pensions and social benefits

Although insurance pensions regularly increase by the actual inflation rates of the previous year, the 2018 pension increase will surpass the inflation rates of 2017. Insurance pensions of non-working pensioners will grow by 3.7% as early as on January 1, 2018, instead of February as before. The increased fixed payment will amount to monthly 4,982.9 rubles, and one pension point will reach 81.49 rubles. As a result, an average annual old-age insurance pension will grow to 14,075 rubles, and to 14,329 rubles for non-working pensioners.

Starting February 1, the monthly social benefit received by federal benefit holders will increase by the 2017 inflation rates.

State pensions, including social ones, will be raised by 4.1% on April 1. Once this happens, an average annual social pension will amount to 9,045 rubles. An average social pension of children with disabilities and persons with lifelong disabilities of the first group will reach 13,699 rubles.

Pensioners who were working in 2017 will have their insurance pensions increased in August 2018: the Russian Pension Fund (PFR) will accomplish the traditional automatic adjustment of insurance pensions.

Same as before, there will be no pensioners in Russia in 2018 with a monthly income smaller than the pensioner’s subsistence minimum in effect in their home region. All non-working pensioners will receive a social supplement, which will increase their pensions to the pensioner’s subsistence minimum.

All expenditures related to the social security and pension obligations of the Pension Fund are financially secured and included in the Fund’s budget.

Assignment of pensions

According to the pension formula put into place in Russia in 2015, a person qualifies for the insurance pension if he or she has a labor record of at least nine years and scores 13.8 pension points.

The maximum number of pension points that can be scored in 2018 is 8.7.

The expected period of paying the funded pension is set at 246 months in 2018. This parameter is used to determine the size of the funded pension; the pension itself is life-long.

Any citizen can apply for the assignment of any type of pension from home: pension assignment applications can be filed in the personal account section of the PFR website or on the public services portal, and the pension delivery method can be modified in the same manner.

The insurance pension will remain the principal type of pension in Russia in 2018. It will be received by 40.35 million people over the year. Four million people more will receive state pensions.

New type of pension

Starting 2018, Russia will have a new type of pension: the social pension for children whose both parents are unknown. The new type of pension resulted from the fact that children of unknown parents, or foundlings were put into an unequal financial position compared to orphans. They had no right to receive the survivor (loss-of-breadwinner) pension because they never had a parent in the eyes of the law.

According to tentative estimates, this type of pension may be assigned to roughly 4,000 foundlings.

Resuming pension’s indexation upon resignation

Please note that working pensioners have been receiving their insurance pensions without indexation since 2016. Yet after a pensioner stops working, he or she receives the full pension, including every pension increase that occurred during the period of his or her employment.

During the years 2016 and 2017, pensions were raised and paid in full after three months since the date of a pensioner’s resignation. The procedure will still take three months in 2018 but a pensioner will be reimbursed.

The full pension will be paid in the following manner: for example, a pensioner stops working in March. In this case, the PFR will receive the employer’s April report in May, and the pensioner will no longer be listed as a working person. The PFR will approve the resumption of indexation in June, and in July the pensioner will receive the full pension plus the difference between the former and current pensions for the previous three months, i.e. April, May, and June. This means that the pensioner will start receiving the full pension three months after he or she stops working, but will be reimbursed for those three months.

Formation of pension savings

The moratorium on forming pension savings has been extended by law for 2018. Please note that this is not “a pension freeze” and especially not “a seizure of pension savings.” The moratorium on forming pension savings means that 6% of the insurance contributions, which could have been assigned to the funded pension, are included in the insurance pension. In any case, pension contributions paid by the employer for the citizen are used in full to form the future pension.

The moratorium does not prevent the transfer of pension savings to management companies or from one pension fund to another at the citizen’s request. One should remember though that money transfers between pension funds should not be made within less than five years, because such transfers lessen the accumulated return on investment.

As always, the outcome of pension savings’ transfers accomplished in 2017 will be summed up by the end of the first quarter of 2018.

Maternity capital

A number of essential additions will be made to the maternity capital program next year.

First of all, the second child born to families with a low income after January 1, 2018, will entitle those families to monthly payments from maternity capital funds. The low income means that family earns less than 150% of the able-bodied population’s subsistence minimum in effect in their home region. The payment will also depend on the region; it will amount to the children’s subsistence minimum established by the region for the second quarter of the previous year. Should a family apply for the payment in 2018, the payment will amount to the children’s subsistence minimum as of the second quarter of 2017.

Secondly, the three-year moratorium on spending maternity capital funds on pre-school education will be lifted.

The possibility of joining the maternity capital program has been extended through December 31, 2021.  This means that the child, who qualifies for the maternity capital certificate, should be born or adopted before that date, December 31, 2021. There are no deadlines for issuing the certificate or using the funds.

The other ways of spending the maternity capital remain unchanged: families can improve their living conditions, pay for education of their children, form the mother’s funded pension, and procure goods and services assisting in the social adjustment and integration of children with disabilities.

An application for the certificate or the use of funds may be filed in the personal account section of the PFR website or on the public services portal.

The size of the maternity capital did not change in 2018: it will amount to 453,000 rubles.

PFR electronic services

Client offices of the Pension Fund always welcome their visitors, but the PFR has arranged so that most of its services can be received online at home. It is a goal of the PFR to do so that clients do not have to visit its offices to apply for services.

All types of electronic services provided by the PFR are available on the Pension Fund’s website, es.pfrf.ru. In order to receive PFR services online, one should be registered with the public services portal, gosuslugi.ru. There is no need for additional registration with the PFR website.

Some services of the Pension Fund can be accessed via the free PFR application for smart phones, which operates on the iOS and Android platforms.

In 2018, the Pension Fund will continue to expand the range of online services, so you should visit the Fund’s website before planning a visit to the PFR office: there is a high degree of probability you will be able to resolve your issue from home.

If you have no registration with the public services portal, the PFR client service can help you with that. One’s account on the public services portal can be confirmed at practically every PFR client office.