Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation

Participation of Non-State Pension Funds in the Social Security Reform of the Russian

Federation

Viacheslav Vladimirovich BataevHead of the NPF Inspectorate of the Ministry of Labour and Social

Development of the Russian Federation

Inspectorate of Non-State Pension Funds of the Ministry of Labour and Social Development of the Russian Federation

Moscow May 2004

Structure of the Presentation

• Main indicators of the development of the system of Non-State Pension Funds (NPF)

• Legal basis of the participation of the NPF in the Mandatory Social Security Insurance (MSI)

• Degree of preparation required of the NPF in order to take part in the MSI

• Place of the NPF in the Russian social security system.

Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации

Trends and General Characteristics of the Activity of Non-State Pension Funds in the

Russian Federation

By 01.01.2004 there were 284 Non-State Pension Funds in existence in the Russian Federation

• The own funds of the NPF are over 125 thousand million roubles, including their social security resources which amount to 90 thousand million roubles

• The total number of members of the NPF is 5.3 million people, in other words, 7.2% of the economically active population

• 426 thousand people are receiving the additional non-state pension, in other words, about 1.35% of all pensioners

• The average amount of the non-state pension is over 640 roubles per month

On 01.01.2004 the Non-State Pension Funds began their activity as insurers of the Mandatory Social Security Insurance.


Number of NPF

26

252

279 271 270294

257 256

284

0

50

100

150

200

250

300

1996 1997 1998 1999 2000 2001 2002 2003 2004

количество фондов с действующей лицензией на начало года

Number of funds with currently valid licence at the beginning of the year

Net worth of the NPF, in thousands of roubles.

0

20000

40000

60000

80000

100000

120000

14000001

.01.

1997

01.0

7.19

97

01.0

1.19

98

01.0

7.19

98

01.0

1.19

99

01.0

7.19

99

01.0

1.20

00

01.0

7.20

00

01.0

1.20

01

01.0

7.20

01

01.0

1.20

02

01.0

7.20

02

01.0

1.20

03

01.0

7.20

03

01.0

2.20

04

СобственноеимуществоПенсионный резерв

ИОУД

1. Own net worth; 2 Social security reserves 3. Resources for carrying out the activity envisaged in the By-laws

Development of Social Security Contributions, thousands of roubles.

852,559 1,093,2541,910,622

4,092,096

6,694,000

11,558,400

22,274,900

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

1997 г. 1998 г. 1999 г. 2000 г. 2001 г. 2002 г. 2003

Пенсионные взносы за год

Social security contributions in the year

Growth in Membership of the NPF

2,032,777

187,422

1,825,241

174,112

2,390,922

259,299

3,341,066

281,011

3,953,103

330,500

4,365,208

351,092

5318811

425646

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

1997 г. 1998 г. 1999 г. 2000 г. 2001 г. 2002 г. Jun-05

Численность участников НПФ на конец года

в т.ч. получающих негосударственную пенсию

1. Number of members in NPF at year end2. Including those who receive the non-state pension

Portfolio Structure of the NPF

0%

20%

40%

60%

80%

100%

01.01.1998 01.01.2000 01.01.2002 01.09.2003

Гос. бумаги 10%

Облигации 10%

Банковские депозиты 20%

Векселя 15%

оо

Акции 45%

1. State papers-10%, 2 Bonds – 10%, 3. Bank Deposits – 20%, 4.Bills of exchange – 19%, 5. shares – 49%

Russian Social Security System

•Capitalized part of the work pension

• Insured part of the work pension

• Basic part of the work pension

Average amountof the pensions is

30-40%of the average wage

In the country

• Additional Pension

Amount of pension depends on sum saved

The financing of the work pension is achieved witha single socialtax and with

contributions to theRussian Pension Fund

The financing of the additional pension

is achieved with the social security

contributions of the employer and/or worker

to the NPF

In the year 2003 (году) the averageamount of the work pension was

1830 roubles per month

Area of NPF activities


The Current System of State Regulation,Control and Supervision of the Mandatory Social Security Insurance Activity

Russian Ministry of Finance

Russian Federal Securities Comission

Russian Pension Fund

State Administration Company

Specialized Depositary

Administration Companies

Non-State Pension Funds

Non-state Pension Fund Administration Company

Specialized Depositary of the Non-state Pension Fund

Мин

тру

д Р

осси и

ControlContractual Relations

Organization of

CompetitionConsultation to the Regulatory Authority

Notice of non-compliance

Insp

ec-

tora

te

of N

PF


Administrative Reform(decree issued by the President of the Russian Federation on

9.03.04 № 314)

Functions of the Organisms of State Power

- Approval of legal structures;

– Control and supervision;– Application of laws;– Administration of state assets;– Provision of state services


Administrative Reform(decree issued by the President of the Russian Federation on

9.03.04 № 314)• Federal Ministries

– Legal regulation in the area established– Coordination and control of subordinate federal services and agencies– Coordination of activity of state funds outside the normal budget

• Federal Services– Control and supervision in the area established– Publishing of individual legal rulings

A Federal Service may be subordinate to the Government of the Russian Federation

• Federal Agencies– Provision of state services in the areas established– Publishing of individual legal rulings,– Maintenance of records, registrations and surveys

The federal agency is not entitled to carry out legal regulation and control and supervisory functions


System of State Regulation, Control and Supervision of the MSI Activity (after implementing the stipulations of decree № 314)

ControlContractual Relations

Notice of Non-compliance

Russian SFRF


State Administration Company

Specialized Depositary

Administration Company

Non-State Pension Fund

Non-State Pension Fund Administration Company

Specialized Depositary of the Non-State Pension Fund


Rus

sian

Min

istr

y o

f F

inan

ce

Legal basis of the participation of the Non-State Pension Funds in the MSI

• Federal Law № 167-ФЗ «Mandatory Social Security Insurance» dated17.12.2001

• Federal Law № 75-FZ «Non-State Pension Funds» dated 7.05.1998 (publishing of Federal Law № 14-FZ dated 10.01 2003 )

• Federal Law № 111-FZ «Investment of Resources to Finance the Capitalized Part of the Work Pension of the Russian Federation» dated 24.07.2002

• Government Resolutions of the Russian Federation, published in compliance with Federal Law № 14-FZ dated 10.01 2003

• Regulatory documents of the Authorized Federal Organism, in compliance with Federal Law № 14-FZ dated 10.01 2003


Legal Basis of the Participation in the MSI (resolutions of the Government of the Russian Federation)

Organization Chart (GK-P12-6004, dated 23.05.2003) stipulates the development of 23 draft resolutions of the Government of the Russian Federation

By 15.04.2004 г. the following resolutions had been passed:on 4.11.2003 № 669 Authorized Federal Organism on 5.12.2003 № 735 Approval of the Resolution regarding licenses for the

activity of the NPFs.on 30.12.2003 № 798 Approval of the Rules regarding information on the new

MSI agreementson 22.01.2004 № 30 Approval of the Calculation Rules for the Indicators of the

Composition and Structure of the Investment Portfolio, for Control Purposeson 6.02.2004 № 55 Approval of the Rules for Transferring Social Security

Savings from one NPF to another or from the NPF to the RPF, and the calculation of their value.


Legal Bases of the Participation in the MSI (resolutions of the Government of the Russian Federation)

- continued

The Government resolutions still missing should regulate:• Investments of social security savings (3 documents);• Additional requirements for administration companies (AC) and specialized

depositaries (2 documents); • Subjects dealing with the accounting systems of the NPFs and press

announcements (2 documents); • Liquidation of the NPF, actuarial assessments and codes of professional ethics

(4 documents). Three documents in the organization chart lost their relevance as a

result of the approval of Decree Nº 314 by the President of the Russian Federation on 9.03.2004

• on 6.02.2004 № 60 Approval of the standard Agreements of the MSI and statements of transfer to the NPF, or from the NPF to the RPF

• on 9.02.2004 № 67 Additional investment limits for social security resources• on 13.02.2004 № 77 Approval of standard insurance regulations for the

NPFs


Legal Basis of the Participation in the MSI (resolutions of the Authorized Federal Organism)(AFO)

New wording of the Federal Law «Non-State Pension Funds» contains 26 rules within the sphere of competence of the AFO. These rules require the preparation of 5 regulatory AFO documents on MSI subjects.

For 23.04.2004 • Resolution Nº 17 of the Russian Ministry of Labour, dated 16.02.04 was approved and

registered in the Russian Ministry of Justice, specifying the regulation of registration of NPFs as insurers or the MSI and the publication of information regarding that registration.

• Resolution Nº 42 of the Russian Ministry of Labour, dated 05.04.2004 was approved and registered in the Russian Ministry of Justice, approving the instructions for filling in declarations of transfers to NPF and from NPF to RPF.

• Resolution Nº 46 of the Russian Ministry of Labour, dated 15.04.2004 was approved and registered in the Russian Ministry of Justice, regarding the enactment of the regulations for registering the social security and insurance rules of the NPF.

• The form for notifying agreements entered into with the MSI needs to be approved Two pending documents of the AFO are dedicated to information about the funds in the

press and the approval of the codes of professional ethics which are awaiting the corresponding Government resolutions. Their absence does not prevent the NPFs being

registered as insurers nor MSI agreements being entered into by the funds.


Scheme of movement of information and monetary resources (during the formation of the capitalized part of the work pension in the NPFs)

Payment of the capitalized part of the work pension


Non-state Pension Fund

Administration Company

Insured person

Employer

Federal Taxation Service

Monetary flows

Information

Investment of Social Security Savings

Annual information about the state of the social security account of the capitalized part of the work pension

Основная сумма

Current payments

Half-yearly insurance payments on the

capitalized part of the work pension

Annual information of

the insurance payments that

are paid in


Activity of the NPFs as insurers of MSI (preliminary measures)

• Development and registration in the AFO of the rules for underwriting the Fund

• Preparation of the materials for registering as a MSI insurer– Copies of the foundation documents of the Fund and information about its

registration;– Rules for underwriting the Fund;– Information ratifying the fact that the Fund complies with the indicators

stipulated by the law.– Accounting balance and results of the actuarial assessment of the past

two years • Presentation to the AFO of a statement regarding the intention to

execute the activity of mandatory social security insurance in the role of an insurer.

• Development of technologies and computer programs to record the activity of the Fund as an insurer of the MSI, in accordance with the standards for personified records.


Activity of the NPFs as MSI insurers (capitalization period)

Necessary conditions

Registration as an MSI insurer

Existence of a notification form approved by the AFO

Transfer of the resources of social security savings from the RPF to the current account of the NPF

Notify AFO and RPF of the agreements signed.AFO – within two weeksRPF – within one monthSend the RPF versions or copies of the agreements, legalized before a notary

Actions depending on results

Signing of a Trust Administration agreement (TA) with the administration company (AC)

Implementation of a publicity campaign, also providing

information for the persons insured

1

Signing of mandatory social security insurance agreements

2

Opening of the social security accounts for the capitalized part

of the work pension

3

Allocation of investment income, depending on the

investment results

4

Record of social security contributions

5Transfer the resources to the AC within one month of their being recorded in the personal account.

Notify the AFO regarding the signing of a trust administration agreement (TA) within three working days. On 1st February at the latest, transfer the resources to the AC. On 1st July at the latest, notify the insured persons of the state of their social security accounts.


Activity of the NPF as MSI insurer (reception of the insured’s resources from the other NPF)


Receipt from the RPF of the notice of modifications in the Single Register of Insured Persons

Transfer of the main amount of the social security savings to the current account of the NPF

Actions depending on results

Signing of the mandatory social security insurance agreement

1

Opening of social security accounts for the capitalized part

of the work pension

2

Allocation of investment income, depending on the

investment results

4

Registro de cotizaciones previsionales

5

Notify AFO and RPF of agreements signed.AFO – within two weeksRPF – within one monthSend the RPF versions or copies of the agreements, legalized before a notary

Recording of social security savings reflected after the transfer of the main sum

3

Pass the resources to the AC by 1st February at the latest.

Transfer of social security resources reflected after the transfer of the main amount to the current account of the NPF

Pass the resources to the AC during the month following their registration in the account.

Transfer the resources to the AC during the month following their registration in the account

Notify insured persons of the state of their social security accounts by 1st July at the latest.


Activity of the NPF as MSI insurer (transfer of insured’s resources to another NPF or to the RPF)


Receipt from the RPF of notice of the modification of the Single Register of Insured Persons

Receipt of social security savings resources from the AC or RPF in the current account of the NPF

Transfer the resources before 31st December of the year in question. Deliver a summary to the insured person showing the state of his/her social security account and indicating the sum that is liable to be transferred.

Activities depending on results

Transfer to another NPF (RPF) of the main sum of social

security savings

1

Transfer to another NPF (RPF) of the social security savings

reflected in the social security account after the transfer of the

main sum (income from investments and social security

contributions)

2

Transfer the resources within one month at the latest after these are reflected in the social security account


Contacts

Address: 109074, Moscow, Plaza Slavianskaya,

ed. 4, building 1

Phones: (095) 925 8500, 298 1825

Fax: (095) 925 8500

E-mail: [email protected]

WWW: http://npfinsp.mintrud.ru

Inspectorate of Non-state Pension Funds of the Ministry of Labour and Social Development of the Russian Federation

Documents

Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation