RUSSIA - The draft law governing the investment strategy of Russia’s new pensions system has suffered a further setback with a row developing over the level of participation of the country’s private pension funds (PPFs).

The bill, as presented last Autumn to the Duma, the Russian parliament, called for the complete participation of the PPFs but objections last week by Mikhail Zurabov, head of the state-controlled Pension Fund of Russia, lead to a postponement of the law being debated in the Duma until May.

Matthias Zeeb, director of Callund Consulting, says the solution may ultimately be to introduce a separate private pensions bill. “Trying to determine the extent to which the private funds should play a part in the reformed state-run system is causing all kind of problems,’ he says.

Zeeb says there are three main reasons for the objections. “Firstly, the PPF market is young and not well-established, unlike the state system whose origins date back to communist times. Then there is continuing concern over the stability of Russia’s capital markets. Thirdly, and probably the main reason, the state pension fund doesn’t want to see its influence diminished in light of private sector competition.”