According to Vedomosti, the Ministry of Finance has drafted a bill on the pension system that sets explicit timeframes for the moratorium on the second pension pillar at 2014-15. Hence, starting from 2016 the pension system is to operate as it did before 2014. Also, the bill implies a transfer in 2015 to the non-state pension funds remaining balances of saving pension contributions per 2H13 and those accounts in VEB which voiced their desire to do so (i.e. those which went out of ‘molchun’ status).
Deputy Minister of Finance Alexey Moiseev commented that this bill was prepared by government order and should be adopted by the end of the year.
A representative of the Deputy Prime Minister, Olga Golodezh, stated that they were not opposing the proposition to return the balances of saving pension contributions per 2H13 and those accounts in VEB which had voiced their desire to do so, while the question concerning the moratorium on the second pension pillar needed further debates.
While the general sustainability of the 3-pillar pension system in Russia, which was created in 2002, is still under question as MinFin’s proposition to route next year’s remaining balances of saving pension contributions per 2H13 and the previous ‘molchun’ accounts in VEB into the non-state pension funds is obviously positive for the outlook on the financial markets. To recap, local financial markets are to be deprived of the only material source of long-term money next year and an additional RUB 500bn of inflows (according to the official estimate) would come in handy.
Hence, should it be adopted (we see the chances as rather high, given the support from the social block within the government), it might ease tight financial conditions, to some extent relaxing the deleveraging pressure on the corporate sector and the growth outlook for next year.
Looking beyond next year, the abolition of the obligatory funded pillar of the pension system – in favour of other spending priorities (mostly military) – would effectively represent the reallocation of resources/capital from the private sector to the public sector. We believe exactly the opposite is needed to prop up Russia’s medium-term growth potential.