Network partner Rosgosstrakh, the largest insurance company in Russia, considers the development of the pension insurance market one of the top priority issues for today.
According to Rosgosstrakh, only around 5% of multinational companies and large local companies in Russia provide pension benefits to their employees. This figure has increased significantly from less than 1% some three to four years ago. Although a few multinational companies postponed pension plan development in 2008-2009 due to the economical crisis, market participants reported a steady interest in corporate pension schemes and growth is expected to rise sharply in future.
The challenges
One of the major challenges facing Russia revolves around demographics. In 2009, Russia’s population was estimated at 141.9 million. The state statistics organisation Goskomstat estimates the number of pensioners in 2010 to be over 38 million, or 27% of the population. Today almost 12.9% of the population is older than 65 years, while the international average is 7%. There are less than two working people per one retiree in Russia today, down from 5/1 in 1990, and 8/1 from the USSR time. Should this trend continue there will only be one working person per two retirees by 2050.
Another challenge is the level of pension contribution by the state. State pensions in Russia today provide an average of 26% of salary on retirement, compared with 60% to 70% in Western Europe. The figure in Russia is expected to drop to 10% by 2020.
Rosgosstrakh promotes pensions
Rosgosstrakh understands the importance of pension planning for the Russian population in general, and for companies keen to attract and retain highly qualified employees in particular.
To meet its clients’ demands in this area, the Rosgosstrakh Group introduced three pension solutions for domestic and international clients in Russia. New services became available when the RGS Non-State Pension Fund joined Rosgosstrakh Group.
- Transfer of mandatory social security contributions from the government-operated fund to the Rosgosstrakh Group (RGS) pension fund
- Participation in the state co-financed pension programme
- Complementary savings plan with guaranteed return
Transfer of mandatory social security contributions
All employees in Russia are required to contribute to a pension fund. The maximum contribution to the funded part is 6% but capped at RUR 27’780 per year.
Up to 2002, mandatory contributions were only allowed to be placed in the state administered fund. In 2009, the return on this state fund was officially less than 1%, while the return from private funds was between 8% and 14%. It is now possible for employees to choose either to continue contributing to the state fund, or to contribute instead to a private fund to handle their mandatory savings. The Rosgosstrakh Group pension fund offers an important alternative to the state fund, and employers are encouraged to explain this option to their staff. Employers play a key role in spreading awareness and providing the opportunities to their staff as well.
Participation in the state co-financed pension programme
Together with the mandatory premium contribution to the pension fund, benefits can be increased through additional contributions made by the employer, employee, or both. The state annually co-finances additional pension contributions in the amount equal to the employee contribution with an annual cap. Enrolment in the state co-financed pension programme is possible only until October 2013, and the program will run for ten years. However, the mandatory pension accumulation together with such participation still does not bring the living standard of the retiree to a decent level.
"Guaranteed with profits" complementary saving plan
This parallel pension solution is not associated with mandatory pension contributions. The complementary savings plan is a flexible insurance policy in the form of a defined contibutions plan that can include additional riders such as classical life or disability coverage. The return is guaranteed at 3.5% and additional returns are passed on to the insured. The guaranteed return allows for presenting this pension solution to a Client in the form of quasi - “defined benefit” plan.
A strong motivator for the move into this type of solution has come from leading international companies operating in Russia, particularly in the banking, oil and gas, pharmaceutical and chemical industries. The major appeal of these products is that they allow companies to provide an increased level of benefits to staff, and strengthen loyalty among key employees.
As an additional service, Rosgosstrakh provides employee presentations and information meetings for company administrators and staff on the topic of employee benefits. Most people in Russia are still unaware of the pension reforms of 2002, and the advantages they offer. Rosgosstrakh is using its network to educate employees and corporate clients about the benefits of investing in a retirement pension.
For more information
please visit www.rgs.ru
Over 90 years of excellence
Rosgosstrakh (RGS), established over 90 years ago, is now a major insurance player in the Russian market. With over 25 million private and 250,000 corporate clients, 3,000 regional offices, 400 claims centres and 60,000 professional staff, Rosgosstrakh offers over 50 different types of high-quality insurance products for individuals and businesses.
Winner of two top awards
Rosgosstrakh won two awards at the Russia’s National Company of the Year event in 2010. With history of over a decade, the awards were established by the RBC Group, a major media organisation in Russia, to recognise the most successful companies in the Russian market.
Rosgosstrakh was honoured once again with the title: Insurance Company of the Year 2010, which it last won in 2005. The company was also the first ever recipient of a new award category established by Microsoft to honour “A high degree of responsibility towards customers and quality of service".
The challenges
One of the major challenges facing Russia revolves around demographics. In 2009, Russia’s population was estimated at 141.9 million. The state statistics organisation Goskomstat estimates the number of pensioners in 2010 to be over 38 million, or 27% of the population. Today almost 12.9% of the population is older than 65 years, while the international average is 7%. There are less than two working people per one retiree in Russia today, down from 5/1 in 1990, and 8/1 from the USSR time. Should this trend continue there will only be one working person per two retirees by 2050.
Another challenge is the level of pension contribution by the state. State pensions in Russia today provide an average of 26% of salary on retirement, compared with 60% to 70% in Western Europe. The figure in Russia is expected to drop to 10% by 2020.
Rosgosstrakh promotes pensions
Rosgosstrakh understands the importance of pension planning for the Russian population in general, and for companies keen to attract and retain highly qualified employees in particular.
To meet its clients’ demands in this area, the Rosgosstrakh Group introduced three pension solutions for domestic and international clients in Russia. New services became available when the RGS Non-State Pension Fund joined Rosgosstrakh Group.
- Transfer of mandatory social security contributions from the government-operated fund to the Rosgosstrakh Group (RGS) pension fund
- Participation in the state co-financed pension programme
- Complementary savings plan with guaranteed return
Transfer of mandatory social security contributions
All employees in Russia are required to contribute to a pension fund. The maximum contribution to the funded part is 6% but capped at RUR 27’780 per year.
Up to 2002, mandatory contributions were only allowed to be placed in the state administered fund. In 2009, the return on this state fund was officially less than 1%, while the return from private funds was between 8% and 14%. It is now possible for employees to choose either to continue contributing to the state fund, or to contribute instead to a private fund to handle their mandatory savings. The Rosgosstrakh Group pension fund offers an important alternative to the state fund, and employers are encouraged to explain this option to their staff. Employers play a key role in spreading awareness and providing the opportunities to their staff as well.
Participation in the state co-financed pension programme
Together with the mandatory premium contribution to the pension fund, benefits can be increased through additional contributions made by the employer, employee, or both. The state annually co-finances additional pension contributions in the amount equal to the employee contribution with an annual cap. Enrolment in the state co-financed pension programme is possible only until October 2013, and the program will run for ten years. However, the mandatory pension accumulation together with such participation still does not bring the living standard of the retiree to a decent level.
"Guaranteed with profits" complementary saving plan
This parallel pension solution is not associated with mandatory pension contributions. The complementary savings plan is a flexible insurance policy in the form of a defined contibutions plan that can include additional riders such as classical life or disability coverage. The return is guaranteed at 3.5% and additional returns are passed on to the insured. The guaranteed return allows for presenting this pension solution to a Client in the form of quasi - “defined benefit” plan.
A strong motivator for the move into this type of solution has come from leading international companies operating in Russia, particularly in the banking, oil and gas, pharmaceutical and chemical industries. The major appeal of these products is that they allow companies to provide an increased level of benefits to staff, and strengthen loyalty among key employees.
As an additional service, Rosgosstrakh provides employee presentations and information meetings for company administrators and staff on the topic of employee benefits. Most people in Russia are still unaware of the pension reforms of 2002, and the advantages they offer. Rosgosstrakh is using its network to educate employees and corporate clients about the benefits of investing in a retirement pension.
For more information
please visit www.rgs.ru
Over 90 years of excellence
Rosgosstrakh (RGS), established over 90 years ago, is now a major insurance player in the Russian market. With over 25 million private and 250,000 corporate clients, 3,000 regional offices, 400 claims centres and 60,000 professional staff, Rosgosstrakh offers over 50 different types of high-quality insurance products for individuals and businesses.
Winner of two top awards
Rosgosstrakh won two awards at the Russia’s National Company of the Year event in 2010. With history of over a decade, the awards were established by the RBC Group, a major media organisation in Russia, to recognise the most successful companies in the Russian market.
Rosgosstrakh was honoured once again with the title: Insurance Company of the Year 2010, which it last won in 2005. The company was also the first ever recipient of a new award category established by Microsoft to honour “A high degree of responsibility towards customers and quality of service".