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How our Pension System Differs From Other Countries

Russian pensions were compared with world ones.Most Russians would like to have a pension of 30-50 thousand rubles. However, representatives of highly paid professions want to receive 2-3 times more in old age. This is evidenced by the results of a recent survey conducted by a popular recruiting service and one of the largest non-state pension funds. Research data on the population’s pension “wishlist” contrasts sharply with reality: the average monthly pension as of mid-2020 in the Russian Federation is less than 15 thousand rubles. Is there a chance to at least double this modest amount in the foreseeable future, and how do Russian pensions compare to world ones?
The authors of the study asked representatives of different professions how much they would like to receive in their old age “for complete happiness.” The results were predictable in the sense that representatives of higher-paid professions wished for themselves higher pensions.

On average, one in five of those employed in production expects payments of 30-40 thousand rubles per month. Doctors, teachers, drivers, waiters, cooks have estimated their pension needs at 40-50 thousand rubles. Well, the highest demands are from programmers, financiers and builders. Most of the employees from these areas, after retirement, would like to receive 100 thousand rubles a month or more.

Five zeros in old age

In itself, the desire to live in old age on 100 thousand rubles, of course, there is nothing shameful. The problem, however, is that from the standpoint of today, such pensions are achievable only for a narrow stratum of citizens: ex-ministers, ex-deputies, ex-heads of regions, plus judges, military leaders and cosmonauts. The overwhelming majority of Russians have a pension at or slightly above the subsistence level, and the national average, according to Rosstat data as of mid-2020, did not even reach 15 thousand rubles (about $ 200).

How does this indicator compare to other countries? Frankly speaking, pale. We are lagging behind the world leaders in pension provision not even several times, but an order of magnitude (see Table 1).

The reason for our colossal lag in the average size of pensions over the leading countries is clear: Russia has very low average wages. And one is closely related to the other: after all, in the solidary pension system, which is used in the Russian Federation, the pension is a derivative of salaries. Social contributions of currently working Russians also form the size of the Pension Fund, from which payments to existing pensioners come.

In this regard, experts around the world use an indicator called the “replacement rate”, which is calculated by the ratio of average salaries and pensions in each country. Here Russia, alas, also lags behind the majority of developed and developing countries, although the abyss is no longer so striking (see Table 2). For example, in the United States, as of 2019, the average pension was $ 1400, and the average salary in the country was $ 4378. The replacement rate is 38%. In Germany, the corresponding figures are 1200 euros and 3771 euros. The replacement rate is 42%.

In Russia, with its average salary (mid-2020) of 47.7 thousand rubles, the replacement rate is even lower – 29.8%. It is noteworthy that in our country this most important social indicator, according to Rosstat, has been falling since 2015: then it was 35.2%.

At the same time, according to the 102nd convention of the International Labor Organization, for a decent social security of the country’s citizens, the pension should be 40% of earnings, recalls the associate professor of the Department of Human Resources Management of the PRUE. Plekhanova Lyudmila Ivanova-Shvets. We are far below this figure – accordingly, the overwhelming majority of Russian pensioners are balancing on the brink of poverty. We generally have a low standard of living and low wages. Therefore,dream pensions can only be taken from large incomes by making savings,the expert says.

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