02 December 2011

How the state shortchanges pensioners

The pension fund miscalculated in its favor
Men live less after the age of 60 than the state lays down in its formulas
Anastasia Bashkatova, Independent Newspaper  

As Rosstat reported yesterday, the average pension in Russia reached 8.3 thousand rubles in October, which is almost 9% more than a year ago. However, some experts are sure that the pension for Russians – at least for men – could be larger if the data on the life expectancy of pensioners were not distorted when calculating it. Representatives of non–state pension funds (NPFs) told NG that the so-called retirement period of citizens does not correspond to real statistics and may be artificially inflated - in order to reduce the amount of pensions paid. Experts do not deny that the state often adheres to the principle of austerity in its calculations, but they also found the position of the NPF somewhat controversial.

The average monthly pension in Russia amounted to about 8.3 thousand rubles in October of this year. Thus, the pension in the country increased in nominal terms by 8.9% compared to October 2010, and in real terms – taking into account inflation – by 1.6%. The average amount of pensions in October 2011 was 35.5% of the average accrued salary. In October last year, the ratio was 36.3%.

Meanwhile, the correctness of the calculations of the Pension Fund of Russia (PFR) raises doubts among some representatives of the NPF. The pension of Russians could be higher – if the state took into account in its calculations the actual, not imaginary demographic situation in the country. Private pension funds are faced with the fact that the state has imposed on them the expected period of survival, based on which they must pay their clients a lifetime funded pension. The expected survival period, or, as it is called in Anton Drozdov's department, the expected payment period, is the estimated number of months that a citizen will live after retirement. NPFs suspect that the state has its own material interest in manipulating the indicators of the expected survival period: by overestimating this period, it is possible to save budget funds for those citizens who will live significantly less than the terms planned by the state.

"According to the current legislation, both men and women have a lifetime funded pension calculated by dividing savings by 228 months (19 years), which, in our opinion, is incorrect. Men, for example, retire later than women, and with a different calculation of savings, their pension could be 18% higher," says Larisa Gorchakovskaya, Executive Director of VTB Pension Fund. The law prescribes a single survival period for calculating both the funded part of the pension and the insurance. Therefore, it can be concluded that with a different calculation formula, not only the funded pension, but also the usual one, could be higher by almost 20%.

The formula for calculating old-age labor pensions for citizens who do not make special pension savings looks like this: the basic part of the pension is added to the insurance part, which is calculated by dividing the pension contributions of a citizen by the expected period of survival. The basic pension in the Russian Federation is on average 3 thousand rubles.

The rest of the pension depends entirely on the labor success of the citizen and the period of survival, we are talking about about 70% of the labor pension.

Representatives of the NPF told NG that men live in retirement, according to Rosstat, for only 15 years and 6 months (186 months). About women in the NPF has not been clarified. Economists specializing in pension reform and independent experts also spoke about the survival period. "The expected retirement time of men in Russia is currently 15 years. The duration of retirement of women in Russia is 24 years," says the head of the Economic Expert Group Evsey Gurvich. "The survival period is calculated according to a complex formula. It includes an array of data on demographic statistics: life expectancy, the frequency of deaths in different periods of life, the proportion of those who survived to each specific age, – explains the subtleties of pension statistics, the CEO of the company "2K Audit – Business Consultations/Morison International" Tamara Kasyanova. – The average life expectancy of men in the Russian Federation is catastrophically low – 63 years. The retirement age is 60 years. But this does not mean that men live only three years after retirement. The average life expectancy of men after retirement today is 12 years, and women – 22 years."

The FIU informed NG yesterday that "the Pension Fund uses only the expected payment period (the survival period), which is established by the federal law on labor pensions in the Russian Federation." The department also pointed out that in the current legislation, which has undergone more than one amendment, the estimated survival period is not 19 years, but already 17 years.

The survival period is established by federal law, so the FIU is not directly to blame for anything, says Marina Mishuris, Chairman of the Board of FlexBank, commenting on the situation. However, the expert continues, the fact that "the state is really interested in reducing payments from the FIU due to the deficit of the latter" is beyond doubt.

Tamara Kasyanova recalls that in 2012 pensions will be calculated based on the period of 18 years of life, and in 2013 – 19 years. These figures are lower than the average life expectancy of women in retirement (22 years), and much higher than the average life expectancy of men in retirement (12 years). Mishuris, in turn, notes that the 19-year survival period may have had some convincing statistical justifications in 2001, when the law on labor pensions was adopted. But today all these grounds are definitely outdated. "The main problem is that in Russia a lot of men die before retirement, at working age. According to this indicator, we are four times ahead of European countries," Kasyanova adds.

Some experts have suggested that the claims of the NPF contain an indirect call to calculate the expected survival period separately for men and women. The thesis that men live significantly less than the state indicates in its forecasts, and as a result they do not receive the pension they are entitled to, experts called generally logical.

However, in fact, the gender division of pensions is fraught with new problems – for example, discrimination against women, because then their pensions would have to be reduced and redistributed in favor of men. "The survival period is by its nature the same abstract figure as the minimum wage. It cannot be accurately linked to demographic statistics. If we tie it, then we need to introduce differentiation not only by gender, but also by different social and professional categories, by risk groups," notes Sergey Shandybin, an analyst at Razvitie. And then the situation will become even more absurd, because it turns out that the survival period may be different, including for smokers and adherents of a healthy lifestyle.

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