Dear citizens of Russia! Dear friends.
16 June 2018, the Government submitted to the State Duma a bill on amendments to the pension system. On 19 July it was adopted by Parliament in first reading. His main, main goal is to ensure the sustainability and financial stability of the pension system for years to come. And that means not only preservation but also growth of income, pensions of current and future retirees.
To achieve these goals the bill, along with other measures, provides for a gradual increase in the retirement age. Understand how important these issues are significant for millions of people, for each person. So I appeal to you directly to talk in detail about all aspects of the changes proposed by the Government to indicate their position and to share with you their suggestions that I consider fundamental.
First of all let me remind you that the debate about the necessity of raising the retirement age did not begin suddenly, not today. Talked about this in the Soviet period, and in 90-e years. But solution is not accepted, for one reason or another was postponed.
At the beginning of the two thousandth and members of the Russian Government, and many representatives of the expert community once again began to aggressively raise the issue of pension reform and raise the retirement age.
The objective conditions for this existed. It was obvious that at the turn of the 2020s years we will inevitably face serious demographic problems. What is the problem?
Every 25-27 years to adulthood, when you can create a family, to have and raise children, we enter a much smaller number of citizens than it should be. This happens as a result of heavy demographic losses during the great Patriotic war. And it’s not only direct losses but also millions not born in the war years.
Period, when adulthood was part of another small generation, also saw in the mid 90-ies of the last century. But at this time, the country is faced with severe economic and social crisis, with disastrous consequences. This led to the second demographic shock. Born even less children than expected. The demographic collapse of the late 90s was comparable to the 1943 and 1944 war years.
And now this, very small generation born in 90-e, included in the age. In this regard, even more increases the load on the pension system, because we have it built largely on the solidarity principle. That is, the pension contributions of people working today are used to pay current pensioners, our parents ‘ generation. And they, in turn, while he worked, sent contributions to pay pensions to the generation of our grandfathers.
The conclusion is clear, the shrinking working-age population is automatically reduced opportunities for benefits and indexation of pensions. So, changes are needed.
But then, in the 2000s, I was against them. Talked about this in private meetings and publicly. For example, in 2005 one of the “Straight lines” straight said that before the end of my presidential term such changes will not.
In 2008, when I left the post of the President of Russia, the basic provisions of the pension system is fully preserved. And now I think that at that time such a position from an economic point of view, was reasonable, and with social – absolutely justified and fair. I am convinced that to raise the retirement age in the early and mid-2000s, it was absolutely impossible.
I recall how in that period the country lived. This fledgling economy, with modest gross domestic product and extremely low wages. This high level of unemployment and inflation. The poverty line was almost a quarter of the country’s citizens. Life expectancy was barely over 65 years.
If those socio-economic conditions, we began to raise the retirement age, and for this, as now planned, to increase pensions, then what could it be then brought? Many families, especially in small towns and rural areas would have lost the primary and sometimes only source of income. At a high level of unemployment and the work would not exist and retire, it would be impossible to get out. And all the possible increase in their pension just “ate” would be high inflation, and as a result the number of poor would be even greater.
It was necessary first to overcome the consequences of the shocks of the 90s, to ensure economic growth and solve pressing social problems.
What has changed over the years? We did not spend time in vain. We – all of us, citizens, the government, the country worked.
As soon as we were able to generate the necessary financial resources, we sent them to the social development and the preservation of our people. Started the implementation of long-term demographic measures, including the maternity capital programme. And it gave good results, partially offsetting demographic failures of the past decades. We have overcome serious difficulties in the economy and in 2016 reached again a stable economic growth. Now the unemployment rate in Russia is the lowest since 1991.
Of course, we still have a lot to do. Including in the health sector, in other areas that determine the quality and length of human life. But the undeniable fact is that due to the complex taken by the state measures and, very importantly, more responsible attitude of people towards their health, the rate of growth of life expectancy in Russia is one of the highest in the world. Over the past 15 years, life expectancy has increased by almost 8 years (7.8 years).
Know that all of us not really used to trust statistics. Our conclusions, as a rule, from what we can see in real life around them. Someone actually lives a long life, and some of our relatives, friends, unfortunately, leaves quite early. But here we are talking about an objective assessment of the growth of life expectancy in Russia, confirmed by the experts of the United Nations.
We have set a goal to reach by the end of the next decade to a life expectancy of over 80 years. And will continue to do everything that people in our country live long and healthy lives.
All what I just said is objective, but still quite dry analysis of the situation. That is certainly important. But it is equally important to feel and consider that the proposed changes are the vital interests, the plans of hundreds of thousands, millions of people. Someone is already thinking to retire to devote more time to family, children, and grandchildren. Someone planning to continue to work and hopes to retire as additional help. And entitled to it, of course. And suddenly such prospects are distant.
Of course, all this is perceived by many people painful. I well understand and share this concern. But let’s see what options we have.
To accept low-income seniors and to wait, when the pension system is “crackling” and finally collapse? To pass unpopular but necessary decisions on the shoulders of the next generation, knowing what awaits the country in 15-20 years, given the real situation, to act?
Again, changes in the pension system, especially associated with raising the age of retirement, worry, worry people. And of course, that all political forces, first of all, of course, the opposition will use this situation for self-promotion and strengthening of their positions. This is the inevitable costs of the political process in any democratic society. However, I asked the Government to seriously study and use all made constructive suggestions, including from the opposition.
As for the current, the current government, the easiest, most easy for her today – nothing to change. Now, in spite of the difficulties, the Russian economy is feeling confident. In the budget there are resources to replenish the Pension Fund. We, at least for the next 7-10 years will be able to continue to index pensions the deadlines.
But we know that gradually there will come a time when the indexation of pensions from the state will not have enough funds. And then came the regular payment of pensions can be a problem, as it was in the 90s.
See, back in 2005, the ratio of working citizens, which are regularly paid contributions to the Pension Fund, and people receiving insurance old-age pension, was approximately 1.7 to one. And in 2019, it will amount to 1.2 to one. That is almost one to one. And if you do not take any measures, we will not be able to keep the income pension system. And that means that the incomes of today’s and future pensioners. On the contrary, they will inevitably depreciate, to decline relative to wages.
And where to reduce them? Pension and so today is quite modest, not commensurate to the contribution made by older generations in the development of the country. We are in front of them a huge debt.
The proposed changes in the pension system will allow not only to maintain the level of incomes of pensioners, but the main thing is to provide sustainable, rapid growth.
In 2019, the indexing of old-age pensions will be about 7%, which is twice the projected inflation for the end of 2018. Overall, over the next six years we will be able annually to increase old-age pension for pensioners on the average on 1 thousand roubles. As a result, this will give the opportunity to 2024, to reach the average level of pensions for pensioners in 20 thousand rubles a month. (Now, remember, this is 14 thousand 144 roubles). In the future, beyond the horizon of 2024, the changes in the pension system will form a solid basis for a steady annual increase in the insurance pension above inflation.
Pay attention to the mechanism of the annual increase of pensions shall be laid down in the bill to change the pension system. We had to do it to its second reading in the State Duma.
Naturally, the question arises, if the Government had considered any other options other reserves to ensure the sustainability of the pension system without raising the retirement age. Of course, Yes. Of course, considered.
On my instructions, the Government until recently carried out this work. All possible alternative scenarios have been carefully studied and calculated. It turned out that, in fact, nothing drastic they do not solve. In the best case just patch holes. Or worse, carry devastating consequences for the economy as a whole.
Well, let’s see, it seems to be effective, seeming a fair measure – the introduction of a progressive income tax. The Ministry of Finance estimates the application of increased tax rates, for example, 20 percent to high income, can give, and not sure of the order of 75-120 billion rubles a year. These funds, in the best case, will last for six days. Because daily, I want to emphasize this, the daily requirement for the payment of pensions in Russia amounts to 20 billion rubles.
Another option is to sell part of gossobstvennosti, for example, as some suggest, all the buildings of the Pension Fund, including its regional offices. Of course, I agree, they too swung their apartments. People find it annoying. And I also support. According to estimates, the total cost of these facilities is 120 billion rubles. But even if we sell them, and the money will be spent on pensions, will be able to pay them about six days. This is not a solution.
Or, it is proposed to impose additional taxes on oil companies, fuel and energy complex. I can tell you, all that we thus will be able to collect enough to pay pensions to a maximum of a couple of months. Moreover, we will supply pensions, entire pension system in the country in an extremely vulnerable position, in dependence on the difference of prices in the world hydrocarbon markets.
Maybe make more active use of the reserve funds are replenished through proceeds from oil and gas? Yes, it is possible for some time, and it is. And if tomorrow, like I said, the prices of these goods fall, which is entirely possible and has happened several times, what then? The reserves will be exhausted instantly, and within a few months. The lives of people, their pension income in the years ahead cannot and should not depend on the price of oil, which changes every day.
Maybe should continue to increase funding of the Pension Fund? At the expense of the Federal budget to cover the deficit? Said, that while there are resources. They are really there. But look here is the big picture.
In the current year for these purposes we have allocated a budget of 3.3 trillion rubles, of which 1.8 trillion rubles to ensure the payment of insurance pensions. If we assume that we want to achieve the goal, to reach an average pension of 20 thousand rubles, nothing is not changing, the Pension Fund deficit would have increased by half to 5 trillion rubles. For comparison, that’s more than all spending on national defense and security of the country.
By choosing this solution, we will sooner or later ruin our finances, will be forced to borrow or print unsecured money, with all the consequences: hyperinflation and increasing poverty. Lacking resources, will not be able to ensure reliable security of the country. Will not be able to solve the most urgent task: to develop education and health care, to support families with children, to build roads and infrastructure, to improve the quality of people’s lives. We are doomed to economic, technological lagging behind the other States.
Therefore, our failure to act now, or the adoption of temporary “cosmetic” measures would be irresponsible and unfair to the country, and to our children.
Again, for many years, I am very careful and sometimes wary of any proposals to change the pension system. Sometimes very sharply reacted to these ideas. However, the trends now prevailing in the field of demographic development and labour market, an objective analysis of the situation shows that the pull on it is impossible. But our decisions must be fair, balanced, necessarily taking into account the interests of the people.
In this regard, I propose a number of measures that will allow mitigate their decisions.
Vladimir Putin spoke about the change in the pension system. Dossier
First. The draft law proposes to increase the retirement age for women for 8 years to 63 years, while for men it increased by five years. This will not work, of course. This is wrong. In our country the treatment of women particular, careful. We understand that they are not only working on the primary place of employment, they, as a rule, the whole house, taking care of family, raising children, care of grandchildren. The retirement age for women should not rise by more than for men. Therefore, I consider it necessary to reduce the proposed bill raising the retirement age for women from 8 to 5 years.
Next. We must provide for the right of early retirement for mothers of large families. That is, if a woman has three children, then she will be able to retire three years early. If four children four years earlier. And for women who have 5 and more children, everything should stay as it is now, they can retire at 50 years.
Second. As already mentioned, the retirement age is assumed to increase gradually. So that people can adapt to new situations, to build their plans. But they are well aware that the hardest thing to have to those who first face with the increase in the retirement age. Very soon. And we need to take this into account.
In this regard, I propose for citizens who had to retire under the old legislation in the next two years, to establish a special privilege, the right to draw a pension for six months before the new retirement age. For example, a person who according to the new retirement age will have to retire in January 2020, will be able to do it in July 2019. That is, again, 6 months earlier.
Third. That you care about and even, I would say, scares people approaching retirement age? They are afraid to face the risk of job loss. That can remain without pension, without salary. After 50 work really hard to find.
In this regard, we must include additional safeguards to protect the interests of older citizens in the labour market. Therefore, for a transitional period, I propose to consider pre-retirement age five years before the date of retirement. Again, here we need a package of measures. So, I consider it necessary to establish for employers administrative and even criminal liability for the dismissal of employees close to retirement age, as well as the refusal in employment of citizens because of their age. Appropriate changes to the laws have to be made simultaneously with the adoption of the bill on raising the retirement age.
Measures for the protection against age discrimination in the labour market in the countries of the world. Dossier
Of course, it would be wrong and unfair to be guided here only by administrative measures. Therefore I instruct the Government to offer real incentives for business that the employers were keen to accept and keep on working citizens approaching retirement age.
Here I would like to add. Older people usually have good professional experience. This is usually a reliable and disciplined staff. They can bring great benefit to their businesses and companies. It is important that they, as well as younger workers, if desired, could undergo the necessary retraining to acquire new skills, to improve their skills.
In this regard I instruct the Government to approve for citizens close to retirement age a special program for professional development. It should work as soon as possible and be financed from the Federal budget.
And if a person approaching retirement age decided to resign of his own free will and have not yet found a new job, and in this case, we need to strengthen social security. It is therefore proposed to increase the maximum size of unemployment benefits for citizens of pre-retirement age more than doubled – from 4 thousand 900 rubles, as of now, 11 thousand 280 rubles from 1 January 2019, and to set the period for the payment of one year.
Finally, it is also necessary to secure the employer’s obligation to annually provide employees approaching retirement age 2 days for a free check-up with pay.
Fourth. While making changes it is impossible to act according to the template. That is, just % increases. We must recognize the special conditions of life and labour of the people.
We have provided conservation benefits for miners, workers of hot shops, chemical plants, Chernobyl, a number of other categories.
I think that you need to maintain the current terms of appointment of pensions for the indigenous peoples of the North.
We must support the residents of the village. Has been repeatedly discussed and even taken a decision on whether 25-cent premium to the fixed payment of pension for pensioners living in rural areas. With 30 years of experience in agriculture. But the introduction of this decision into force has been postponed. I propose to begin these payments from January 1, 2019.
Fifth. I think that those who started early to work should be able to retire not only in age but also taking into account the earned experience.
Now the bill stipulates that the pensionable service on early retirement is 40 years for women and 45 for men. Offer for three years to reduce the pensionable service on early retirement. For women under 37 years and for men up to 42-H.
Sixth. Consider fundamental to maintain for a transitional period, until the completion of the reforms in the pension system, all Federal benefits in force on 31 December 2018. Mean tax benefits on property and land.
Yes, these benefits have traditionally been provided only with the retirement. But in this case, when the pension system will change, and people relied on these benefits, we have to make for them an exception, not to provide benefits in connection with retirement and upon reaching the appropriate age. That is, as before, will benefit women upon reaching 55 years and men 60 years. Thus, even before retirement they will no longer pay the tax for your house, apartment, garden plot.
The retirement age in Russia. Dossier
I know that representatives of the party “United Russia” in regional legislative assemblies and governors have undertaken initiatives to preserve and all existing regional benefits. This is a very important things for people. Such as free travel on public transport, incentives for utilities, major repairs and gasification, incentives for the purchase of medicines and several others. Support, this approach certainly. And I hope that all necessary decisions will be taken in the regions before the entry into force of the new law on pensions.
As you know, many experts now believe that we have too long with the issues that are discussed today. I don’t think so. We just were not ready to this sooner. But to save on do not. It would be irresponsible and could lead to serious consequences in the economy and the social sphere, negatively affect the lives of millions of people, because now it is clear that sooner or later the state will still have to do it. But the later it gets, the tougher those decisions. Without any transitional period, without storing a number of benefits of those mitigation mechanisms that we can use today.
In the long run, if we hesitate, it may jeopardize the stability of the society, and hence the security of the country.
We need to develop. Needs to overcome poverty, provide a decent life for older people, and current and future retirees.
The proposals we have discussed today, will be issued as amendments and promptly submitted to the State Duma.
I very objectively, in detail and sincerely told you about the current status and proposals for sustainable development of the pension system in our country. Once again, we have to make difficult, difficult, but necessary decision.
Please treat this with understanding.