RETIREMENT STRATEGIES OF RUSSIANS (2005-2010)Olga KuzinaHigher School of Economics, Moscow

Retirement strategies

Do people have an idea about the amount of their future state pension? Do they think that their state pension will be enough to make their ends meet?Do they expect to have additional sources of income? What are these sources? How many do make any financial provisions for their retirement?From which sources do current pensioners draw their incomes? Do people know anything about the state program of co-financing the retirement savings?What do people think about this program? How many do participate?

How are people going to ensure that their incomes will be sufficient to provide them an acceptable level of living?

%Male 45Female55

10018-24 1425-34 2035-44 1745-59 2960+ 20

100

All-Russian surveysN=1600 Sample error - 3,4%

Datadescription

Waves2005 – ZIRCON 2007 – НАФИ2009 - HSE2010 – HSEIn all waves the same question wording and sampling methodology was used

RETIREMENT INCOME STRATEGIES OF PEOPLE OF WORKING AGE

When you will retire do you think that the level of your pension will be enough to live on? % of people of working age

RETIREMENT INCOME EXPECTATIONS – VERY FEW ARE SURE THAT THEY WILL BE ABLE TO LIVE ON THE STATE PENSION

The level of retirement confidence in the USA

RETIREMENT INCOME EXPECTATIONS DO NOT DIFFER ACROSS AGE GROUPS 25+

When you will retire do you think that the level of your pension will be enough to live on? % in age groups, 2010

RETIREMENT INCOME EXPECTATIONS DO NOT DIFFER ACROSS QUINTILE INCOME GROUPS

When you will retire do you think that the level of your pension will be enough to live on? % in quintile income groups, 2010

Do you expect that apart from the state pension you will receive additional income from other sources? % of people of working age

RETIREMENT INCOME EXPECTATIONS – EVERY SECOND EXPECT TO RECEIVE INCOMES FROM OTHER SOURCES

TYPES OF ADDITIONAL INCOME SOURCES IN RETIREMENT, % OF THOSE WHO EXPECT TO HAVE INCOMES FROM OTHER SOURCES IN RETIREMENT

2005 2007 2009 2010Continue to work in my profession 41 42 52 48Continue to work, will find a job to be able to do 33 34 40 39My spouse will continue working in retirement 5 8 15 8Expect that my children will help me 12 18 20 21Hope to get help from charity foundations 0,5 0,7 0,7 0,5Self-provision 15 14 13 8

Consider moving to a smaller (cheaper) apartment (house) to use the difference for consumption as the need arises

0,6 2 2 0,7

Receive income for renting out my real estate property 2 3 3 4Plan to use my savings 5 9 5 8Plan to receive a supplementary pension from the private pension fund or life insurance policy

3 4 3 5

Expect to receive inheritance 2 3 4 3Do not know now, will think about it later 13 14 6 14Something else 1 1 1 2Total (over 100% because this question allowed multiple choice answers)

133 153 165 161

N 602 670 553 582

AGGREGATIVE ANSWERS, % OF THOSE WHO EXPECT TO HAVE INCOMES FROM OTHER SOURCES IN RETIREMENT

2005 2007 2009 2010

Work 72 73 83 81Help 12 18 20 21Financial tools 9 14 11 15

Self-provision 15 14 13 8

Real estate 3 4 4 4Do not know 13 14 6 14

Other 1 1 1 2N 602 670 553 582

TYPES OF ADDITIONAL INCOME SOURCES IN RETIREMENT, % OF PEOPLE OF WORKING AGE

2005 2007 2009 2010Work 42 42 41 43Help 7 10 10 11Financial tools 5 8 5 8Self-provision 9 8 6 4Real estate 2 2 2 2Do not know what these sources will be 8 8 3 7Other 1 1 0 1Do not expect to have additional incomes in retirement 23 24 36 29Do not know if will have additional incomes in retirement 19 19 15 18N 1090 1168 1128 1095

RETIREMENT INCOME STRATEGIES OF PENSIONERS

TWO THIRDS OF PENSIONERS DO NOT HAVE ADDITIONAL SOURCES OF INCOMES, % OF ALL

PENSIONERS

2005 2007 2009 2010

Have additional incomes 29 38 32 33

Do not have additional incomes 69 57 67 66

N 392 411 468 503

TYPES OF ADDITIONAL INCOMES IN RETIREMENT, % OF ALL PENSIONERS

2005 2007 2009 2010Work 10 18 22 26Help 8 12 8 4Financial tools 1 1 2 1Self-provision 13 12 4 4Real estate 0 0 0 1Other 1 2 0 3No additional income 69 57 67 66Difficult to say 2 5 1 1N 383 411 468 503

Over 100% because this question allowed multiple choice answers

KNOWLEDGE ON THE STATE PROGRAM OF CO-FINANCING THE RETIREMENT SAVINGS

THE MAJORITY OF PEOPLE OF WORKING AGE KNOW THAT THEY CAN VOLUNTARY CONTRIBUTE TO THEIR PENSIONS BY ALLOCATING MONEY TO PRIVATE PENSION FUNDS BUT VERY FEW DO THAT

2009 2010Yes, I do it 8 8Yes, I would like to do it 16 12No, I might wish to do it but I know very little about it

25 18

No, I do not 50 62N 779 851

Do you allocate (or plan to do it) money to a private pension fund in order to get a supplementary pension in retirement? % of those who know about this possibility

Do you know that you can voluntary contribute to your pension by allocating money to a private pension fund in order to get a supplementary pension in retirement? % working age people, N= 1098, 2010

2009 2010Do not trust private pension funds 58 60No nothing about private pension funds 6 5Do not have enough information how to choose a pension fund properly 3 3

Do not have spare cash for it 31 37Do not know for sure my spending and earnings in future 13 11

Other 5 7Difficult to say 2 0N 392 525

Why do not you want to contribute money to a private pension fund to get a supplementary pension? % of those who do not want to deal with private pension funds, multiple choice

with not mоre than 2 answers

LACK OF TRUST RATHER THAN LACK OF MONEY OR INFORMATION MAKE PEOPLE REFUSE FROM USING PRIVATE PENSION FUNDS

AWARENESS OF THE STATE PROGRAM OF CO-FINANCING THE RETIREMENT SAVINGS AND

WILLINGNESS TO PARTICIPATE IN IT

THE MAJORITY OF PEOPLE KNOW ABOUT THE STATE PROGRAM OF CO-FINANCING THE RETIREMENT SAVINGS BUT ONLY 27% CAN SAY THAT THEY

KNOW IT WELL

Starting in 2009 it is possible to get a 100% supplement to your voluntary contributions to supplementary pensions if you contribute from 2000 up to

12000 rubles. Do you know about it? %, N=1098, 2010

73

21

What is your attitude towards this program? %, N=1223 , 2010

EVERY SECOND OF THOSE WHO ARE ELIGIBLE FOR THIS PROGRAM APPRECIATE IT HIGHLY

22

Are you going to take part in this program? %, N=1223, 2010

NEVERTHELESS ONLY 22% ARE READY TO TAKE PART IN THIS PROGRAM

23

THE DYNAMICS OF ATTITUDES TOWARDS THE PROGRAM AND WILLINGNESS TO PARTICIPATE – THE DECREASE OF OPTIMISM IN 2010, %

2009 2010 Attitudes Willingness Attitudes Willingness

Positive/yes 14 6 14 4Rather positive/ rather yes 41 24 36 18Rather negative/ rather no 15 27 17 40Negative/ no 5 22 7 23Difficult to say 25 23 26 16N 1227 1227 1223 1223Balance of positive estimations over negative ones, points 22 -18 17 -30

24

VERY FEW REPORT THAT THEY HAVE STRATEGIC GOALS AND EVEN LESS - STRATEGIES TO ACHIEVE THESE GOALS

%, N=1600 , 2010

25

DISCUSSION It seems that in the life-long perspective Russians do not smooth consumption as the Life-Cycle Model (Modigliani) predicts.

Why do Russians prefer work after retirement and not savings? The idea of rationality is conceptualized not as a given inborn property of individuals but rather as a competence acquired through socialization in the presence of the particular type of social institutions: based on personal or impersonal trust.

The lack of impersonal trust in financial institutions makes long-term financial savings for retirement impossible. That is why in life-cycle terms pensioners may compensate the loss of incomes by continuing to work after retirement or through sharing incomes in an extended family.

Income smoothing rather than consumption smoothing.

Could it be generalised to other institutional frameworks?