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    RUSSIA'S FINANCE MINISTRY PROPOSES RUSSIANS TO ACCUMULATE PENSIONS THROUGH VOLUNTARY CONTRIBUTIONS

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    MOSCOW, March 19, 2004. (RIA Novosti) -- Russia's finance ministry proposes that Russians should accumulate their pensions by voluntarily contributing 4% of their wages to them. Alexei Kudrin, finance minister, made a statement to this effect at a joint session of the boards of the finance ministry and the economic development and trade ministry (MERT) held Friday, In Kudrin's words, "the state must stimulate such actions by adding 2 more percent from the state insurance fund to these contributions." "The state insurance fund will add these 2% to citizens' pensions upon their retirement. If a citizen decides to retire later, he can capitalise his future pension and get a 65-70% increase in it," Mr. Kudrin said.

    He said that a fall in prices would make it possible to raise pensions. "Today, the average pension equals 30% of the wage, and we set the task to raise it to 50% and more, say, to 57% of the average wage," Mr. Kudrin continued.

    He explained that this could be done at the expense of the insurance, accumulative portion of the pension, as well as the voluntary contribution, which will be stimulated by the state.

    In reply to the question put by President Vladimir Putin, who attended the session, as to whether low-paid citizens will be protected under this scheme, Mr. Kudrin noted that for citizens with low wages the pension would equal 80-90% of the wage.

    During the session, the finance minister also told about the ministry's proposal to cut the employers' payments to the Pension Fund from 28% to 20% of the wage fund.

    At the same time, it is projected that 14% of all payments will go directly to the Pension Fund, while 6% will go to the Fund from the state budget.

    The finance ministry suggests that a new system of social payments should be introduced from January 1, 2005.

    Yet another proposal, which is being made, is to reduce the employers' payments to the Social Insurance Fund from 4% to 3.2% of the wage fund, and their payments to the Mandatory Medical Insurance Fund - from 3,6% to 2.8% of the said fund.

    Some social payments may be shifted from the employers to the employees.

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