MOSCOW Aug 5 Russia's government is considering
using contributions to employees' privately-managed pension
funds to help plug holes in the budget for the second year
running, Russia's Vedomosti newspaper reported on Tuesday.
Russia has already imposed a freeze on defined pension
contributions to private fund managers in 2014, diverting around
243 billion roubles ($7 billion) into state coffers.
Now the government is considering extending this into 2015,
providing around 300 billion roubles for the budget next year.
According to Vedomosti, citing an anonymous government source,
President Vladimir Putin and Prime Minister Dmitry Medvedev have
already agreed to extend the freeze.
Medvedev's spokeswoman was not immediately available for
Steps to transfer savings from private management to the
state budget reflect growing strains on Russia's public
finances, which are being hit by a severe economic slowdown
exacerbated by Western sanctions over Ukraine.
But any further reduction in the sums allocated to private
pension funds would represent a blow to the country's nascent
asset management industry, and a setback to the development of
Russia has been steadily rolling back a pension reform
launched in 2002 under which Russians were supposed to save
towards their own retirement.
Under that plan, payroll contributions equivalent to 6
percent of salary were to be paid into individual retirement
accounts, with a 16 percent levy continuing to go towards
financing current pensioners via the State Pension Fund.
Last year Russia in effect made the 6 percent savings
contribution voluntary, as Russians who do not express a
preference now pay the whole 22 percent levy into the state
Even Russians who do choose to continue with the 6 percent
savings contribution have not been able to do so in 2014 - and
now potentially in 2015 - because of the freeze.
The diversion of funds helps to plug budget shortfalls in
the short term, but would increase the long-term fiscal burden
arising from an ageing population, analysts said.
"It is certainly negative news, as this move breaches the
'social contract' between the state and society to develop
long-term private savings," analysts at Russia's Alfa Bank said
in a note.
"Though this step may assist in improving the Pension Fund
balance in the short run, in the long run, it would result in
more social obligations to the state, being a risk for budget
(Reporting by Jason Bush, editing by John Stonestreet)