Russian pension system = pyramid scheme?

Russian pension system will soon become a classic Ponzi scheme, warns a former finance minister and a prominent government economic expert.

Increase in life expectancy while reducing the number of working-age population will lead the country to economic collapse, writes the former Deputy Prime Minister Alexei Kudrin, head of the Economic Expert Group Evsei Gurvich in an article for the journal. '. Problems of Economics ... (. Number forthcoming). Once in each generation the proportion of working less and less, and retirees - more and more, is the imbalance between the generations. Increase in life expectancy of today's pensioners by an increased tax on the next generation, as a result, each generation pays more than the previous one, and gets more than the payment, - that under the scheme are based pyramid schemes.
Raising taxes or budget funding - the most. '. simple ... Transfer to the Pension Fund. (. excluding share of the unified social tax, part of which is to go to the premiums paid to the budget ) rose from 1.5% of GDP in 2007. to 5.5 % in 2010. And contribution rates - from 20 to 26%. Following this logic further - and that pension solutions must operate for at least a period of a generation, not a three-year budget - that by 2050. or the contribution rate will increase to 70%, or the transfer of the pension system, the budget should be increased to 10% of GDP. (. all federal spending - about 20 % of GDP).
But if you do not raise taxes and transfers - and this path leads to an economic crisis, as rising taxes discourage economic activity - will have to put up with a deep decline in pensions. But would not agree pensioners. They are the most active part of the electorate, and by mid- century, the proportion of retirees in the number of voters will increase from one third to one half.
This process is another important negative point: dominance in the structure of the electorate pensioners driving the country into. '. trap of old age ...
The problem of the pension system - not an accounting issue, and political economy problem: how to coordinate the interests of different generations, convinced Kudrin and Gurvich. And fiscal and political economy problems can be solved by increasing the retirement age increase in life expectancy, they believe, although this measure is not popular - in part because that the retirement age and the population, and the government is seen as something immutable.
Need a new constant - the ratio between the length of working life and the period of retirement.
Estimates by the World Health Organization for the 55 countries show that with increasing life expectancy increases and the period of healthy life. (. correlation - almost 1:1 ). is. '. inflation. age ... are 65 years old, roughly the equivalent of a Russian, who is now 60 years old. In Denmark, for example, the retirement age increases continuously and automatically - following the increase in life expectancy.
Correct pension policy - one that matches the behavior of the person throughout his life, and indicate Kudrin Gurvich. Citizens of the increase in the period of healthy life are not using to save up a little more for their old age, but prefer to work longer. Therefore, the optimal government response to the aging of the population - to raise the retirement age without changing the contribution rates.
According to the calculations of authors, including. '. Inflation age ... retirement age may correspond to 60-62 years for women and 62-63 for men. In countries. EC. increases in age, along with other measures, will by 2060 g. increase the pension burden by 2.3% of GDP instead of the inertial growth of 8.7%. Exception - in Greece, where the measures only increased the burden on the budget: 3% of GDP. (. in addition to the inertial growth of 12.7 % of GDP) by 2060 g. But retribution has occurred, note the authors.
Health Ministry, are working to change the formula for calculating the pension amount is going to link it with the value of work experience, told. '. Vedomosti ... With this formula every five additional years of pension increased by only 8%, estimated by experts of the Academy of National Economy Tatiana Omelchuk:. '. Honestly just raise the age. If we want to reduce the deficit of the pension system and to increase the level of pensions, an alternative to this method, no '.