Russia to freeze pension contributions for third year - Vedomosti daily

MOSCOW, Sept 30 (Reuters) - Russia’s government has decided to freeze defined contributions made to privately-managed pension funds for the third year running, the daily Vedomosti reported on Wednesday, citing officials.

Vedomosti said Prime Minister Dmitry Medvedev had told parliamentarians of the ruling party, United Russia, about the decision, but that it had yet to be discussed with President Vladimir Putin.

The move would save the budget 344 billion roubles ($5.23 billion) in 2016, by reducing subsidies needed for the State Pension Fund, which will receive the extra cash.

It would represent a defeat for economic liberals in the government, who support the accumulated part of the pension system because it helps to develop the weak capital market and reduces the long-term fiscal burden of pensions.

Vedomosti cited an anonymous official as saying the contributions’ freeze would be a “double blow” to the economy, because it would raise borrowing costs for both the government and companies by reducing funds available to the capital market.

Russia’s budget faces a huge shortfall because of low oil prices and the Kremlin is looking for alternatives to unpopular cuts in current pensions.

“We have ended up in Zugzwang,” Vedomosti cited former finance minister Alexei Kudrin as saying, borrowing a term from chess: “When every move worsens the situation”. ($1 = 65.8318 roubles) (Editing by Andrew Osborn)