The transition from a centrally planned economy to a market economy, from communism to democracy, and from unitary to a federal state had extreme consequences for the overall welfare of Russian population: including health services, social protection, and pension system. The Plan for Social and Economic Policy Development proposed initiatives to restructure the funding and provision of housing, education, health care and pension. In this paper, we will focus on the last theme. As a matter of fact, reforms of the pension system occur in many countries –either developed or emerging-, that makes it a so critical issue and a so interesting theme. Moreover, even if the economic transition is plenty of amazing learning and discovers, it should be nice to see this transition from people perspective and their every day's life issues. There are nowadays 40 millions of pensioners in Russia. And while the life minimum is evaluated at 960 roubles (38€), the average pension is only 1915 roubles (56€). A great challenge is thereby to increase the pension benefit.
The purpose of this essay is to analyse changes in the provision of social services, in particularly the pension system, and evaluate its sustainability. So after a quick general overview of welfare in Russia, the essay describes firstly the former Soviet Union pension system, and secondly how the first reforms took place. Then the essay focuses on the new pension system: reviewing its characteristics, one can find some benefits but also some risks to overcome. As a conclusion, the essay reviews some policy options for reducing these risks and improving the system.
[...] On the one hand, the advantage is that there will be very few new players in the pension and financial system, which make the enforcement of the new system easier. On the other hand, it is less ambitious and potential benefits are also more limited. To conclude, in my point of view is the information and the education of the public a crucial issue. In fact, many changes are often cancelled due to political difficulty: this is the case for the raise of the retirement age. [...]
[...] Finally, according to the study of Kuznetsov & Ordin (2001), the transition to a funded pension system produces a social welfare gain. The model they used predicts long-run macroeconomic gains, even if the majority of people alive at the moment have to bear the burden of higher taxation during the transition. VI. The limits and risks According to the World Bank (2002), the new pension system faces four main risks The design of the pension system Many features of NDC reforms have not been adopted so far in Russia. [...]
[...] This system was build on the principle of solidarity, as it was based on an intergenerational exchange of income and allowed the state to re-distribute that income in favour of poor people Shocks during the transition The pension system was shattered by the economic transition. The crisis condition demonstrated the impossibility of preserving the traditional pension system regarding increasing demographic strains and progressive aging of the population (Khmyz, 2004). On the one hand, it faced a revenue problem. In fact, as the main revenue of pension, i.e. [...]
[...] One of them was the incapacity of the state to track individual contributions The private pension funds We have first to notice that establishment of a private pension system started in the middle of the 19th century in Russia. By the beginning of the 20th century, as many as over 200 retirement insurances were operating. The private pension system was reintroduced in 1992 by Presidential Decree. However, the experience of non-state pension funds was quite chaotic. If there were a few hundred in 1997, the entire fund lost money and many collapsed in the 1998 crisis, sometimes suspending their pension payments. [...]
[...] The private companies now involved might also be able to play a significant role in educating the public The financial market requirements The safekeeping of pension assets requires macro-economic stability and long-term reform of capital and financial markets. Moreover, the government has to elaborate a solid debt management strategy. One option for the government is to increase the limits on foreign investment of pension assets Improving administrative capacity The main goals are to create an integrated national database for the pension credits and accounts of individual workers and then developing a modern financial management system. [...]
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