Pension savings: bonds in focus

The share of bonds in Non-governmental Pension Funds’ (NGPF) portfolios of pension funds and pension savings have shown consecutive growth in recent years. This number stood at 62.5% in 2017 Q1. The dominant position of bonds is also typical of OECD countries: the instrument’s average share stands at 54% (as of late 2016).

A comparison of the structures of invested pension funds between Russia and 27 OECD countries is presented in the Review of Key Indicators of Non-governmental Pension Funds in 2017 Q1. According to the findings, the share of bonds in ten countries was higher than in Russia.

The OECD publishes the structure of total pension savings portfolios, which in Russia’s case means that NGPF pension savings are recognised where the share of bonds is traditionally high (82.3% for 2017 Q1). Viewed separately, the structure of holdings in non-governmental funds will have a lower share of bonds, at 52.2% (including 42.8% of corporate bonds). In NGPF portfolios, this instrument accounts for 48.8% (of 58.1% of total investment in bonds). Last year, this figure rose by 6.2 percentage points. ‘The gradual rise in the proportion of corporate bonds in the savings portfolio has occurred on the back of a reduction in deposits. This is attributable to the Bank of Russia’ policies to boost the performance of invested pension savings and force out banks as intermediaries between the real sector and NGPFs’, says Elena Chaikovskaya, Director of the BoR Financial Market Development Department.

Shares top the list of investment types in four countries (39.6% and more). A further 16 countries demonstrate a higher proportion of shares than Russia (10.7%). The average proportion of shares in the OECD pension funds portfolio totalled 24.6%.

The total portfolio of funds and pension savings in NGPFs totalled 5.3 trillion rubles, equalling 6.1% of GDP. By this indicator, Russia lags behind most OECD countries.

Thus, 26 out of 35 countries posted better results than Russia in 2016. The indicator maximum for the OECD was 181.8%, with the minimum at 0.6%.

At the same time, the volume of Russia’s pension portfolio in absolute terms (85.7 billion) is higher than that of 18 OECD countries.