Jun 9, 2017
Our goal is to improve the retiree’s quality of life

Author: Marina Rudneva

Marina Rudneva, FG FUTURE's CEO, explained how the system of non-state pension funds was arranged and what payments would be available for future pensioners in 2022.

Marina Rudneva, FG FUTURE’s CEO, explained how the system of non-state pension funds was arranged and what payments would be available for future pensioners in 2022.
Most future pensioners are currently completely uncertain about what the situation will be by the time they theoretically begin to receive their cumulative component of the pension. Will they get anything at all?

Marina Rudneva: I am absolutely sure that, yes, they will definitely get something. At present, the savings into non-state pension funds are all in place. They are managed by commercial companies with very professional management structures and with serious investment managers. The Bank of Russia once built a fairly rigid structure and system, and significantly increased the level of control over pension savings, so they would be preserved. In addition to this, the Deposit Insurance Agency has provided for the current insurance of all pension savings.

But doesn’t the funded portion accrue interest?

Marina Rudneva: As for freezing, then, of course, they do not grow. But there is such a thing as investment income, earned every year, and if for the last three years non-state pension funds showed an average profitability of about 8–9%, then your pension account is growing by this 8–9%, one way or another, depending on the fund you selected and on how successfully it manages your money.
How do you assess the prospects of your business, as the assets do not get into the funds anymore due to the freeze? You have a certain capital that you manage. Is this enough to do this business seriously and for the long haul?

Marina Rudneva: This is not enough and, like any financial institution, I would like to have more, but we live in specific political and economic environment, and it is quite a difficult struggle. Nevertheless, the government proposed a new concept for individual pension capital. Of course, it requires serious adjustments and is not yet finalized, but the idea is to transfer pension savings to private ownership. This is something that, probably, is interesting for any citizen and gives people the opportunity to save pension money on their own. At the same time it is clear that financial literacy of the population is at such a level that relatively few people think about their future and their pension. Therefore, the idea is to make it quasi-voluntary. To start with, a minimum one percent deduction p.a. and gradually increase it to 6% in 6 years.

We know perfectly well from our own experience that a lot of changes may happen in 20 years, so here is the question: Is it quasi- or truly voluntary? According to most experts, people do not trust the system and prefer gold-diamond-apartments, i.e. the assets they can really manage.

Marina Rudneva: Of course, if we keep on reforming things continuously, then people’s trust in the pension system will certainly not grow. Let’s take for example the banking sector. These companies survived complicated procedures, a system of corporatization and, ultimately, you have deposit insurance guarantees for RUB 1.4 mln. People have money, and they do not try to manage it them by themselves: they put them on deposit.

Still, they can withdraw this money, but they cannot withdraw pension money anymore.

Marina Rudneva: But this is the only way for civilized pension accrual. All developed countries use this system and it works everywhere. At present, the amount of money in the pension system in other countries is ten times higher in relation to GDP than in our country. I would like to note that at present the investment declaration is so tough and the control is so serious that the Bank of Russia has significantly cleared the range of non-state pension funds and only large and stable players have remained on the market. I hope that our government will come to its senses and cancel the freeze, but if it continues, the IPC will surely start operating in 2019–2010.

Marina, about 15 years ago, an average Russian pensioner, in our understanding, was an elderly person, poorly dressed, with a small pension, so he could not afford much. How has the portrait of a Russian pensioner changed today?

Marina Rudneva: It seems to me that now our task is to change the pensioner’s image: a person who wants to travel, to consume a large number of goods and services, to think about leisure and to have the opportunity to help his children and grandchildren. We need to strive for this. Our population is aging rapidly, and the service sector for the elderly is in great demand. In 10 years it will be a huge market, which is currently just emerging. I’m talking about health infrastructure, rehabilitation and assisted living facilities. If we turn to western experience, the assisted living facilities are a big market, including a huge number of the active population, making a conscious decision to leave home and move to such facilities. In our country such institutions still have an image of a depressing place, as this sector is not yet covered. But if you do a survey of 35-year-olds, they have no rejection of this system anymore: At the moment people think about it, and not even with respect to their parents, but to themselves.

A non-state pension fund is also going to create an environment for pensioners, isn’t it?

Marina Rudneva: Of course, this is extremely important, as this is a socially significant business; closely related to pension funds. We are building the first professional assisted living facility of this kind in Istra, with the English operator and the leading Israel rehabilitator in the world. This will be the first professional institution of its kind, a pilot project, focused on the middle class.
And in the future, who will pay for staying in such assisted living facilities? pensioners or their children?

Marina Rudneva: All over the world, children pay for it. The housing owned by a pensioner may be an additional source of funding: he can sell or rent it and thus solve this issue.
When will your foundation start paying the first pensions?

Marina Rudneva: From 2022, all funds will begin such payments on a mass scale. And we are already making some payments. As for the amount of payments, there is a pension calculator on the fund websites, so you can calculate your future pension. Now, you can already join the investment pension provision, even without the IPC system. This is a voluntary contribution that you can make and take, for example, by signing a contract for only five years, and then, if desired, extend it.

This will work well for the funds system, because pension money is the source of long-term investments.

Marina Rudneva: This will work, as you, in fact, divide your liabilities into a long and short-term, and will also manage them.

In 2022, the first pensioners to see the ten-year result of the system will appear. What else will pension funds start doing from now on? As they will start losing money if their inflow stops.
Marina Rudneva: Of course, therefore, it is extremely important to launch individual pension capital, so that the inflow of money is always stable. If this does not happen (which I doubt), then to launch other individual products, when people will have already brought their money into the system. By the way, we already started just such a pilot project a year ago. And there are people who are ready to do it. By 2022 it will also be important to provide convenience and comfort to the population: Pensions should be accrued correctly and on time, full access to the information should be provided and together with the transparency of operations, personal accounts, mobile applications and a sufficient number of offices. We need to make this system available to the population, because at the moment there aren’t such massive payments and it will be a great challenge for us to ensure all of this.

How do you see a retired person by 2022?

Marina Rudneva: Retired people will be more active, interested in life; they will be less focused on family and more on themselves. Accordingly, they will travel, consume different services, and possibly take better care of themselves from a medical point of view. This can also turn to a business for non-state pension funds. Our group thinks about it on a daily basis, we have a team that generates ideas about services of interest to future retirees. However, all market participants think about it.