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Social welfare system in transition: The reform of the pension system

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  1. Introduction.
  2. General view on welfare.
  3. The former Soviet Union pension system.
  4. The beginning of the reforms.
  5. The contemporary pension system.
  6. The benefits.
  7. The limits and risks.
  8. The way forward.
  9. Conclusion.
  10. References.

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. [...]

[...] The minimum contribution period are now much reduced: from 20/25 years required, five contributions years are now enough to become eligible Description of the benefit of the multi-pillar system The pension the workers will receive is made of three components: The base part is a basic benefit: the same amount is guaranteed for everyone by the government. The insurance part is a notional defines contribution (NDC) pay-as-you- go pension scheme: calculated according a formula, which depends on the amount of earnings. [...]

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