BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/22
In addition, eligibility for pensions based on years of service begins to rise by six-month increments each year from the start of 2017. The current required number of years of service for federal office holders is 15. There are no other unified requirements, and regions and municipalities can presently decide their requirements with a range of 10−20 years of service. For all levels, the minimum requirement will be 15.5 at the start of next year and will rise to 20 years by 2026.
The changes are part of the emerging reform of the pension system, which has become increasingly necessary as government pension spending has gradually risen to almost 9 % of GDP and a quarter of total government budget spending. Moreover, budget revenues have fallen substantially on lower oil prices and economic recession. Several high officials have indicated, however, that no decision on a general increase in the pension age is expected before 2018.
With the government facing tight budgets, other decisions affecting pensions have also been made. Accumulation of budget revenues to the savings pot of the state pension fund has been skipped since 2014 (a sum equalling 0.4 % of GDP annually). Increases in Russian pensions were lowered to just 4 % this year, well below 7 % headline inflation. Pensioners who work got no increase this year (the official data is that 40 % of about 35 million people receiving old-age pensions in Russia are working). The value of pensions will fall tangibly this year in real terms after dropping nearly 4 % last year. It was the first decline in real pensions since 1999. The average pension in recent years has been about 33−35 % of the average wage; the target set in connection with declaring sharp pension hikes nearly a decade ago was 40 %.