PENSION SYSTEM

The Russian Pension System

The Russian Pension System

Introduction

The needs and demand of mankind varies from time to time, from their age to age. It is fact that the human demands are dependent on their income level. The prime time for the person to earn is the time of young age because of high earnings and energy. However, the demands still exist when the person becomes old and too weak to earn anything. Therefore there is a big need of managing resources. It can be done by compelling the youth to save their money for their future use. The humans also need to live together and to coordinate with each other for fulfilling their own needs. The civilization has reached to the age where the nations have adopted the government structure and expect respective government to work in the favour of the citizens of the nation. It is a fact that the type of economy varies from country to country such as capitalist, mixed and socialism. However, each types of economy posses few aspects of collecting and distributing money to old citizens. This shows the importance of the compensatory plans for the old citizens. Moreover, the government used to focus on making their respective nation save money. The savings actually work as channelizing investments which is very vital for economy growth. There are three pillars such as pension funds, social security and private savings. Each pillar has its own characteristics however, the pension's funds overlapped the social security funds in appearance but the administration is totally different. The paper will focus on the importance of each type of fund and highlight the importance of the each type separately. This will give a clear view of the importance level (Castello, 1998, pp. 130).

Discussion

These pillars are very important for the citizens and for the economy. The Russian economy is categorized as socialist. The need for such pillars is even higher in such type of economy. The pension fund of the Russia looks like pillar because it supports the old citizens of the country. The government of Russia also uses the pension funds in its economic activities. The Russian government earn large amount of interest on amount raised for pension funds.

Russia's funded second-pillar pension system is set to follow the likes of Poland, Slovakia and the Baltic states in a plan drawn up by Prime Minister Dmitry Medvedev's government to cut mandatory contributions from 6% to 2%. Workers can either choose to have their contributions invested in one the many privately run non-state pension funds (NSPFs) or the default option of state-owned Vnesheconombank (VEB). As of mid-2012, VEB had RUB 1.4 trn (€35.9bn) in second-pillar assets, the 105-odd NSPFs RUB 558.3bn and 15.4 million members. In Russia, the retirement age for the male is 60 years and 55 years for women. The retirement age for the citizens of the Russia is considerably low as compared to the retirement age of European country (Lieberman, ...