MOSCOW, October 2 (RIA Novosti) – President Vladimir Putin sought to reassure investors and savers Wednesday that reforms to Russia’s pension system, currently being negotiated within the government, will not end in the seizure of funded pension contributions.
“The government is not discussing the confiscation of these deposits, heaven forbid,” Putin told the VTB Capital annual investment forum during an exchange with an investor who challenged him over pension reform.
In a controversial move that some have seen as the first step in dismantling funded pension contributions, the government last month said that such contributions in 2014 would not be used in the normal way but channeled into a special distribution fund.
“We should guarantee the deposits in private pension funds, … guarantee their safe-keeping, security and the effectiveness of their use – three very important criteria. I don’t want cheated depositors to appear in our country again,” Putin said at the Moscow conference.
The government will make at least five or six decisions about how to enforce these guarantees as part of pension reform by the end of this year, Putin said.
The Russian pension system is made up of two parts: unfunded pension contributions that go straight into the State Pension Fund, currently running a large deficit, to pay current pensioners; and the funded part, introduced in 2002, which provides a pool of long-term capital that works as a cornerstone of stable financial markets in many countries.
Putin said Wednesday that the funded pension pool – the so called “cumulative part” – currently holds between 2 trillion and 3 trillion rubles ($65 billion and $100 billion).
Former Finance Minister Alexei Kudrin has been one of the most vocal critics of recent changes to Russia’s pension system. Kudrin told reporters Wednesday that the alteration to funded pension contributions announced last month was a “very unfortunate decision” that sets a dangerous precedent.