RUSSIA - Russia is considering giving tax relief to non-state pension funds in a move to kickstart voluntary pension savings.
Veronika Popelysheva, manager in the global business unit and employee benefits at Aon Consulting in Moscow said discussions within the government are currently under way on a future change, prompted by lobbying from insurance companies.
“There is a working document from insurance companies which at the moment is being discussed by a special pensions group in the government,” said Popelysheva. “The proposal comes from insurance companies and non state pension funds. They want to change our taxation legislation.”
Elizabeth Hebert, chief executive of Moscow-based Pallada Asset Management, said non state pension funds had been neglected while the government was concentrating on reform of state pension funds, but now things are changing. “The government wouldn’t give non state pension funds appropriate tax breaks,” she said.
“The reason was [that] the pension funds were non transparent and being used as a slush fund for the corporations themselves that they would use for affiliated businesses or to finance their own business. For that reason the duma has always been reluctant when discussing revision of tax treatment of pension funds to give any tax breaks to corporations or individuals for pension funds.”
But she said that boosting pension savings would be in line with President Vladimir Putin’s stated policy in encouraging companies to be socially responsible.
At the same time the Russian government is promising to double state pensions between 2005 and 2008. But as it is also reducing its social taxes, industry insiders are questioning where the funds will come from to finance the extra spending.
“I believe if they really double pensions in nominal terms by 2008 we will need to transfer money from the federal budget,” said Anton Stroutchenevski, economist with Troika Asset Management in Russia. “In 2005 the federal budget will transfer US$3bn to pension funds, so we will need to cut other spending in the federal budget.”
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