Russia’s second-pillar pension funds (NPFs) may be facing another year of reduced inflows.
In March, the Russian news daily Vedomosti reported that the finance ministry planned to extend the contributions moratorium, in place since 2014, into 2017.
As in the case of the previous moratoria, the contributions will be diverted into the first-pillar Pension Fund of the Russian Federation (PFR) to help finance existing pensions benefits.
Separately, Reuters reported that Bank of Russia (CBR) – the pensions regulator – and the finance ministry were now considering making the mandatory system voluntary.
If correct, the decision would mean a victory for the so-called ‘social bloc’ in the government, headed by Olga Golodets, deputy prime minister for social affairs, which remains hostile to the funded part of the Russian pensions system.
Golodets recently claimed the second-pillar system lost RUB200bn (€2.6bn) in 2015, a charge denied by the CBR, a strong supporter of the privately managed system.
Since 2014 the Russian pension fund sector has faced an undeniably challenging period, including the obligation to convert to joint-stock status, receive CBR authorisation to sign up to the Deposit Insurance Agency (DIA) guarantee scheme, implement risk-management systems, generate returns in an investment-unfriendly climate and compete for new clients.
For many pension fund members themselves, the changes have proved confusing, as shown by the results of last year’s NPF campaign to win new clients from each other, and from the PFR – those whose contributions were being managed by state-owned Vnesheconombank (VEB) or private asset managers.
The campaign targets included the molchani – ‘silent ones’ who failed to choose an NPF or asset manager themselves and thus defaulted to VEB’s management.
The molchani had been given until the end of 2015 to switch or remain with VEB.
According to the PFR, in total, 13.42m fund-switching statements were sent, of which 5.48m were rejected.
Of these, 2.46m were multiple applications from individual citizens.
A further 1.3m applied to switch to an NPF not registered with the DIA.
The number of DIA-registered funds, the only ones allowed to accept new members and also receive contributions frozen for the second half of 2013, grew to 33 by the end of 2015.
A further four have signed up since.
In addition, some 1.1m applied to join a fund that ended up being liquidated by the CBR for regulatory violations.
Of the successful applications, 4.09m moved from the PFR system to an NPF, while 149,100 did the reverse.
Some 3.14m switched from one fund to another, while 201,200 switched asset management companies.
As of the end of 2015, VEB still acted for the largest share of insured (49.3m), while the number of NPF clients had grown by some 8.8m to 30.9m.
A relatively small number – 460,000 – were signed up with private asset managers.