Pension funds may boost profitability for individuals
According to a draft Bank of Russia ordinance, non-governmental pension funds (NPFs) in some cases will not make allocations to the mandatory pension insurance reserve at the end of the year. This will increase the profitability of pension savings in individuals’ accounts and the amount by which the funded pension is indexed, at the same time maintaining NPFs’ financial stability.
NPFs are required to form a mandatory pension insurance reserve to guarantee the performance of their obligations to insured persons and comply with the legally established requirements to ensure lossless results of pension saving investment over a five-year period. The draft ordinance assumes that a fund will not make reserve allocations if it successfully passes stress-tests and if the reserve (less funds included in it over the last three years that have not been claimed by legal successors of deceased insured persons) already amounts to 3% of the total amount of pension savings.
It is planned that the new approach will be applied starting from determining the amount of annual mandatory pension insurance reserve allocations for 2021, i.e. in 2022. Suggestions about the draft ordinance will be accepted from 11 through 24 January 2021.