Pension Reform Is Overdue

Russia needs urgent pension reform, says Benedict Clements from the IMF’s Fiscal Affairs Department. Public spending on pensions in Russia has already reached 8% of GDP, which is just 1% less than in the developed countries, and in the near future the expenditure will rise due to rapidly aging population.

In the OECD countries the average rate of contributions to pension funds is 20% and the replacement rate (the percentage of pre-retirement income that is paid out upon retirement) is 54%.

In Russia, the contributions are higher, but pensions are lower and the retirement age in practice is 52 years for women and 54 for men. Because of the low retirement age, public spending is rising rapidly, despite low replacement rate. In 2030, government spending may reach 11% of GDP, by 2050 - 15% of GDP.