Investment activities of pension funds of the Russian Federation

Lazy Investor Blog > Need to Know

Investing in your future is the basis of motivation for an investor. This is especially true for long-term strategies related to pension capital. The topic of non-state pension funds has been raised on the blog more than once. But since I published an article about funded pensions, a lot has changed in the market. The rules of the game in this sector are revised so often that the assessment of future investment results requires constant updating. In today's review, based on new data, we will examine the following questions:

What problems have accumulated in the pension system;
NPF or Pension Fund: what to choose;
What to expect from the pension system.

How pension savings are formed

All pension savings located in a special part of a citizen’s individual personal account must be invested. Moreover, this applies to all funds located and transferred to the citizen’s account in the form of compulsory insurance contributions from the employer, additional contributions from the citizen himself, voluntary contributions from the employer, and state co-financing contributions. It is also possible to use maternity capital funds to form a funded pension. These funds will also take part in the investment.

If a citizen has not made a decision on the formation of a funded pension, then pension savings formed before January 1, 2014 (before the introduction of a moratorium on funded pensions) will continue to be invested. In any case, if a citizen has any pension savings, they are definitely invested.

Citizens themselves can choose the ways in which pension savings will be formed and invested. These methods can be:

formation of pension savings, including funded pensions, through the Pension Fund of Russia (PFR);
formation of pension savings, including funded pensions, through the Non-State Pension Fund (NPF). In this case, you can transfer the funded part of your pension to the NPF.

Important Feature

: if your employer pays mandatory insurance contributions for you, and you have voluntary pension savings, then the same investment procedure will apply to all your savings.

Let's look at these methods in more detail.

What is the essence of this type of investment activity?

We all know that each of us puts a certain percentage of our income into a personal retirement account every month. Gradually, the amount in the account accumulates and in the future, in fact, will constitute the pension payments that a citizen receives upon reaching a certain age and work experience.

All these investment funds are legally the property of the Russian Federation, but do not become part of the state budget and cannot be used for any financial purposes, or act as collateral when concluding any financial transactions. The citizen himself, who makes such investment contributions to Pension funds, cannot withdraw this money from the account or use it in any way earlier than is accepted by law. In the future, security will be calculated for him from these funds every month, and he can also receive a one-time benefit when registering it.

Since contributions to the Pension Fund are a kind of investment activity, everyone can choose the fund in which they will invest their funds. At the same time, all citizens born in 1966 can choose with which company to enter into an agreement for the trust management of their money.

Formation and investment of pension savings through the Pension Fund of Russia

If you form your pension savings through the Pension Fund, then the territorial body of the Pension Fund at your place of residence will establish and pay the funded pension.

To form a funded pension (pension savings) through the Pension Fund, you need to select one of the following investment portfolios:

a) investment portfolio of the management company (MC)

;
b) the basic investment portfolio of the state management company (GMC)
;
c) expanded investment portfolio of the State Management Company
.

The basic investment portfolio includes government securities of the Russian Federation and corporate bonds of Russian issuers. The expanded investment portfolio includes, in addition to those indicated, mortgage securities, bank deposits in rubles and foreign currencies, and bonds of international financial organizations.

Currently, the only GUK is Vnesheconombank.

The list of management companies is posted on the Pension Fund website.

Investment of pension savings will be made taking into account your choice.

You can update your investment portfolio and/or choose a different management company no more than once a year.

So, the choice of investment portfolio has been made. What's next?

Complete an application for choosing an investment portfolio (IP) and send it to the Pension Fund.

The application can be submitted in person or sent in another way (including in the form of an electronic document or through a multifunctional center for the provision of state and municipal services).

Establishing your identity and verifying your signature when applying through a multifunctional center is carried out by the center itself.

When sending an application by mail, the signature on the application is certified by a notary.

If you personally contact the territorial office of the Pension Fund of the Russian Federation at your place of residence, you will need a passport and an insurance certificate of compulsory pension insurance.

The application deadline is no later than December 31 of the current year.

The Pension Fund considers the application by March 1 of the year following the year in which the application was submitted, and notifies you of the results of consideration of the application by March 31.

There is no need to take any action to select the expanded investment portfolio of the State Management Company. Those. if you remain silent (do not submit an application), then pension savings will automatically be invested in the expanded investment portfolio of the State Management Company.

List of literature on pensions and insurance

Constitution of the Russian Federation (taking into account the amendments introduced by the Laws of the Russian Federation on amendments to the Constitution of the Russian Federation dated December 30, 2008 No. 6-FKZ, dated December 30, 2008 No. 7-FKZ, dated February 5, 2014 No. 2-FKZ, dated July 21, 2014 No. 11- FKZ)
Budget Code of the Russian Federation dated July 31, 1998 No. 145-FZ (as amended on December 27, 2018) // Rossiyskaya Gazeta, No. 153-154, 08/12/1998.
Civil Code of the Russian Federation (part one) dated November 30, 1994 N 51-FZ (as amended on August 3, 2018) (with amendments and additions, entered into force on January 1, 2019) // Rossiyskaya Gazeta, No. 238 -239, 12/08/1994.
Federal Law of December 15, 2001 No. 167-FZ (as amended on December 11, 2018) “On compulsory pension insurance in the Russian Federation” // “Rossiyskaya Gazeta”, No. 247, 12/20/2001.
Resolution of the Supreme Council of the Russian Federation of December 27, 1991 N 2122-1 “Regulations on the Pension Fund of the Russian Federation (Russia)” // SPS ConsultantPlus
Begicheva, E.I. Legal regulation of pension provision in the Russian Federation / E.I. Begicheva // Russian law online. 2017. No. 2. P. 61-69.
Verovaya, S.S. Main problems of the pension system of the Russian Federation / S.S. Verovaya // Student forum: electron. scientific magazine 2020. No. 27(48). URL: https://nauchforum.ru/journal/stud/48/43627 (access date 04/13/2019)
Glinskaya, D.R. Main problems of pension provision in the Russian Federation / D.R. Glinskaya // Federal State Budgetary Educational Institution of Higher Professional Education "Mordovia State University named after N.P. Ogarev". – 2020. – pp. 96-107
Ivanova, S.V. History of the development of pension provision in Russia / S.V. Ivanova // Legal sciences: problems and prospects: materials of the V International. scientific conf. (Kazan, October 2020). — Kazan: Buk, 2020. — pp. 84-87.
Kazova, Z.M. Assessing the effectiveness and financial stability of the pension system of the Russian Federation / Z.M. Kazova // Scientific and practical magazine Alley of Science” - No. 14. – 2020. – P. 2
Kriulin, V.A. Assessing the level of sufficiency of financial support of the Pension Fund of the Russian Federation / V.A. Kriulin // Politics, economics and innovation. — 2020. — No. 1 (18). — P. 5.
Madatov, A.A. Pension system of Russia: Development prospects / A.A. Madatov, V. Yu. Mikhalchuk // Finance and Credit. — 2020. — No. 25. — P. 77 — 81.
Markova, V.S. The Pension Fund has a double / V.S. Markova // [Electronic resource] - URL: https://vecherka74.ru/news/17201-u-pensionnogo-fonda-poyavilsya-dvoynik.html (access date 04/21/2019)
Nevraeva, V. A. Pension reform in the Russian Federation: problems and development prospects // “Current issues of finance and insurance in Russia at the present stage.” Sat. Art. according to mat. III regional scientific and practical conference of university teachers, scientists, specialists, graduate students, students. Nizhny Novgorod State Pedagogical University named after Kozma Minin. - 2016. - pp. 184-185.
Oleynikov, A.A. Administrative and legal status of the Pension Fund of the Russian Federation / A.A. Oleynikov // Modern scientific research and development. — 2020. — No. 8 (16). — P. 402-405.
Pudova, V.S. Problems of pension provision in the Russian Federation and ways to solve them / V.S. Pudova // “Scientific and practical magazine Alley of Science”. – 2020. – No. 4(20) – P. 4.
Sadykova, L.M. Problems and prospects of pension insurance in the Russian Federation / Sadykova L.M. // “Scientific and practical electronic journal Science Alley” - No. 11(27) - 2020. - P. 2-3
Soloviev, A.K. Pension provision in Russia // Population. — 2020. — No. 1 (75). — P. 14-21.
Sochivko, S.A. Pension reform / S.A. Sochivko // [Electronic resource] - URL: https://svpressa.ru/society/article/230347/?cba=1 (access date 04/11/2019)
Stanchin, I.M. Pension provision as an instrument of social protection / I.M. Stanchin // Voronezh Economic and Legal Institute. – 2018.- No. 7. – pp. 192-196.
Stepanchenko, O.A. Pension reform and demographic situation in the Russian Federation // Social and economic sciences. Student scientific forum: electr. Sat. Art. according to mat. XII international stud. scientific-practical conf. No. 1(12). — URL: https://nauchforum.ru/archive/SNF_social/1(12).pdf
Udovik E.E. Problems of development and main directions for improving the Pension Fund of the Russian Federation / E.E. Udovik // Federal State Budgetary Educational Institution of Higher Education "Kuban State Technological University". – 2020. – 10.2 (25). – pp. 245-248.
Yakushkin, S.A. Pension reform in Russia: development prospects / S.A. Yakushkin // Bulletin of science and practice. — 2020. — No. 8 (21). — P. 222-226.
They came to the Pension Fund of Dagestan with searches [Electronic resource] - URL: https://pasmi.ru/archive/230801/ (date accessed 04/12/2019)
Pension Fund of the Russian Federation. Official site. [Electronic resource] - URL: https://www.pfrf.ru (access date 03/12/2019)
Natixis Global Asset Management pension index for 45 countries / information and analytical project on real investments 2020. Access mode [Electronic resource] - URL: https://www.investinfra.ru/novosti/891-opublikovan-pensionnyi-indeks-melbournemercer- global-pension-index-po-27-stranam.html (accessed 04/18/2019)
An employee of a pension fund issued a pension of 150 thousand rubles to her father [Electronic resource] - URL: https://corrypcii.net/news/sotrudnica_pensionnogo_fonda_oformila_svoemu_otcu_pensiju_v_150_tysjach_rublej/2019-04-08-2629 (access date 04/16/2019)

Formation of a funded pension through a non-state pension fund

You can refuse to form a funded pension (pension savings) through the Pension Fund and choose a non-state pension fund. But then the NPF will assign and pay you a funded pension. He will also invest pension savings. You can also transfer your funded pension to a non-state pension fund.

NFP works with certain management companies and manages your funds according to the right of operational management.

If you choose an NFP, you need to submit an application to the Pension Fund and then enter into an agreement with the selected NFP. There is no need to conclude an agreement with the management company.

You will conduct all further communications regarding the formation of pension savings and their investment, as well as the payment of funded pensions, with the NFP.

How to transfer from NPF to Pension Fund

Questions about how to transfer from a non-state pension fund back to the Pension Fund, as well as how to transfer from one non-state pension fund to another, often arise among citizens.

You can change the previously selected method of forming a funded pension (pension savings). Those. You can:

transfer from the NPF to the Pension Fund (and thus return the funded part of the pension to the Pension Fund);
transfer from the Pension Fund to the Non-State Pension Fund;
move from one NPF to another;
replace the investment portfolio.

To do this, you need to submit an application to the territorial office of the Pension Fund in person or send it in another way, for example, in the form of an electronic document or through the MFC.

If you have access to your personal account on the Pension Fund website, then almost all of this can be done using electronic services.