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Protecting Pension Rights

The Russian Government May Have Found an Unorthodox Way to Raise Retirement Age Fair of vacancy at Employment center in Kazan By Tai Adelaja Russia Profile 04/30/2012

As workers around the world prepare to celebrate International Workers Day, their Russian peers may be about to lose one of the enduring gains of worker solidarity. The Russian government may gradually abolish a number of job categories deemed hazardous enough to merit retiring early, Health and Social Development Deputy Minister Alexander Safonov said on Friday. Under current Russian labor law, workers engaged in occupations that expose them to health hazards have the right to retire with a full pension at age 50 for women and 55 for men. Russians working as miners, lumberjacks, pilots, cosmonauts, as well as those in a dozen of other professions who are entitled to retire even earlier, could lose the privilege if the new measure is approved, analysts say.

More that 3.2 million Russians, or 14 percent of the Russian workforce, currently retire and receive their pensions early due to occupational or other hazards, RIA Novosti reported. The payment of early retirement benefits for this category of workers, which is divided into two broad groups, consumes about 300 billion rubles ($10.2 billion) annually according to the State Pension Fund. "The present situation allows us to put the issue of gradual abolition of early retirement benefits for those in the first and second group on the agenda," Safonov said, referring to the dire situation with the growing state Pension Fund deficit.

The deputy minister acknowledged, however, that poor working conditions in some risk-prone professions will remain an issue even after abolishing early retirement for some workers. "In general, poor working conditions, industrial accidents and occupational diseases will continue to lead to serious economic losses for both the state and the employer," Safonov said. According to the Health Ministry, the total losses due to occupational accidents and diseases have reached 1.94 trillion rubles ($66.1 billion), or 4.3 percent of the GDP. About 160,000 Russian workers currently suffer from various forms of occupational diseases, according to figures released by the Center of Pathology. The center said the figures have been increasing at an annual rate of 8,000 people.

The measure is the latest in a series of budgetary tricks proposed by the government to hide growing deficits in the state Pension Fund as it shies away from pursuing aggressive pension reforms. In recent months a growing chorus of experts has urged the government to raise retirement age, which is much lower than in other European countries. The World Bank recommended such a step following predictions that Russia’s economically active population will shrink by 25 million people by 2050 due to unfavorable demographic trends. The Finance Ministry has also proposed increasing the pension age gradually from 2015 by six months annually for women and by three months for men – until both categories reach equal retirement age. Currently, women In Russia retire at the age of 55 and men at the age of 60.

However, top state officials appear to be looking for ways to deal with the problem without precipitating the social unease that an increase in retirement age could engender. Russian President Dmitry Medvedev said in a television interview in Moscow on Thursday that the country's overdue pension reform can be undertaken without changing the pension age at all, adding that a completely different pension system could be created. He said the government will take into account the views of citizens before making any decision regarding an overhaul of the system.
Prime Minister Vladimir Putin, who returns to the Kremlin as president next week, has also spoken out against increasing the pension age, and instead supports continued growth in pensions, which he said regained their Soviet-era level in 2010.

Andrei Isayev, a top lawmaker in the pro-Kremlin United Russia party, confirmed last week that the government has no plans to radically reform the pension system. "There will be no cardinal changes to the pension system in its present form," Isayev said, while acknowledging that the number of pensioners in Russia has already exceeded 40 million. He said the budget should be able to absorb the fiscal burden of a growing number of pensioners as more teachers, professors, doctors and skilled workers swell the ranks of the middle class and increase their contributions to the Pension Fund, he said.

But by far the most ingenious solution came from First Deputy Prime Minister Igor Shuvalov. Shuvalov said last week that he was against a proposal by Russia’s Finance Ministry to raise the pension age in the country to 63 years. “My personal position is that we need to change the pension formula instead of the pension age,” Shuvalov said. Shuvalov said Russian citizens should have the right to retire at the age of 55 or 60 and get the pensions they have earned. The essence of Shuvalov's suggestion is that those who are dissatisfied with the size of their pension savings could opt to delay retirement until they earn enough pension, analysts say. "This is the same as raising retirement age, albeit in a quiet and veiled manner," said Anton Safonov, an analyst at the Investkafe agency. "With such an approach, the government can hardly be blamed for taking unpopular measures as the choices rest squarely on the shoulders of the citizens."

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