The State Duma has approved the third reading of draft law № 364062-6 on non-contributory pension and bill № 364069-6 on the funded component of a retirement pension.
According to the bills, the government will introduce the so-called “new pension formula”, or the new pension regulations envisaged by the mandatory pension insurance system, will be introduced on January 1st, 2015.
Under the new system, the size of a pension will depend on:
- The salary: the higher the salary, the higher the pension. If the employer didn’t deduct from the employee’s salary to make contributions to the pension fund (by paying illegal salary to evade taxation), such earnings will not participate in the formation of a future pension;
- The length of pensionable service: the longer the service, the more pension rights the worker will enjoy; there will be a pension coefficient for each year of employed service;
- The age of applying for a retirement pension: pensions will increase dramatically every year for people who have reached the retirement age but postpone withdrawing from service.
According to the new rules, the old age retirement pension will transform into a non-contributory pension and a funded pension. The non-contributory pension will envisage a fixed amount paid monthly regardless of the length of pensionable service (similarly to the present-day fixed amount of the non-contributory pension fixed at 3 610, 31 rubles in 2013).
Under the new legislation, army service, childcare leave, and other kinds of socially meaningful periods in people’s lives, including an official absence from work to take care of a disabled member of the family, or a relative over 80, will be included in the length of employment. The so-called “yearly coefficients” will be awarded for these so-called “non-contributory years».
Taking a retirement pension later than usual will become an advantage. The non-contributory pension will increase by a certain bonus coefficient after each year of postponing retirement. For example, if you seek a retirement pension 5 years after reaching the retirement age, the fixed part of your pension will increase by 36%, while the non-contributory pension will go up by 45%; if you apply for a pension 10 years after you reach the retirement age, the fixed amount will increase by 2,11 times, while the non-contributory pension will rise by 2,32 times.
For individuals with an employment record: disabled persons of group I, individuals over 80, people who worked or live in the Far North or same-status territories, there will be higher pensions. These pensions will be higher at the expense of a higher fixed amount, or due to the so-called “northern coefficients”.
Disability or loss-of-breadwinner pensions will be awarded in accordance with the previously set rules.
The old age non-contributory pension will be awarded to women of 55 and older and to men of 60 and older, like it is now. An increase in the retirement age is not on the agenda. The old age non-contributory pension will also be awarded on the condition that the person has at least 15 years of employment. This increase in the minimum length of employment will proceed in stages: employment time will increase by 6 years in 2015 and in the next 10 years will be increased by 1 year annually. Sources in the Pension Fund say that on an average, Russians retire after 34 years of employment; according to forecasts, 97% of Russians will qualify for the old age non-contributory pension by gaining at least 15 years of employment.
To qualify for a retirement pension the individual will also have to earn 30 pension coefficients, or points. These 30 points will be awarded if your employer has paid insurance fees to the Pension Fund to the amount of two minimum wages for 15 years, or one minimum wage for 30 years.
These points’ value will be transferred into money and will increase annually. As it becomes clear from the new rules, the coefficient for the year that follows cannot be lower than the coefficient of the previous year – it can only be higher, given the inflation rate and the receipts of the Pension Fund.
Citizens who will enter the employment service in 2015 will enjoy the new pension rights in full. All pension rights that came into effect before 2015 will be preserved and effectuated under the new rules.
Retirement pensions that have already been awarded (will be awarded by January 2015), will be changed in accordance with the new formula. If the size of the new pension is lower than the amount the pensioner received before January 1st 2015 the pension will be preserved at the previous level.
According to the amendments proposed in the course of the discussions at the State Duma, working pensioners whose salary is under 18 000 rubles will enjoy the right to have their pensions reviewed. A working pensioner will thus earn 1-3 points, which will be transferred to his pension account. In other words, the pensions of all working pensioners who earn under 18 000 rubles will be reviewed in full. Should they earn more than 18 000, their pension rights will be guaranteed proceeding from the under 18 000 threshold.
The length of childcare leave for women who will retire after January 1st 2015 will be included in the total length of pensionable employment. Should the guaranteed and non-guaranteed pension periods coincide in length, the retiree will have the right to opt for the more beneficial one.
In addition, people employed in the farming sector who have worked in agriculture for at least 30 years and live in rural areas will be paid extra money as part of the fixed part of their pensions as of 2016.
Under the previous legislation, all pensioners living abroad were required to open pension accounts in Russia. According to the new rules, this requirement will concern only those Russians who will retire after January 1st 2015.