A long-term austerity initiative was signed into law by Russia’s president, setting the stage for a broad investment program. The official text detailing the package is accessible through the portal that publishes legal acts.
The core aim of the project is to revive investment activity among Russian citizens and strengthen the role of private savings in the economy.
Authors describe the program as a straightforward and appealing financial instrument for individuals. It allows contributions to be funded either from personal resources or from retirement savings held within the state pension system created for such purposes, with the government providing incentive support as described in the explanatory note.
The State Duma Financial Market Committee presented a government bill version that was prepared for the second reading on June 26.
Program terms
The program is scheduled to commence on 1 January 2024. Participation is open to adults aged 18 and over, whether independently or on behalf of another person.
Participants must enter into a special contract with a non-state pension fund and then make a savings contribution. The state will co-finance these savings: if monthly earnings do not exceed 80,000 rubles, the co-financing ratio is 1:1; if earnings are up to 150,000 rubles, the ratio becomes 1:2; and for earnings above that level, the ratio is 1:4.
The fund will begin disbursing payments when specific conditions are met. Withdrawals may be taken as ongoing lifetime payments or as emergency withdrawals, with a minimum withdrawal period of ten years. Access to funds is generally allowed after 15 years or upon reaching a set age of 60 for men and 55 for women.
Prior to any deadlines, withdrawals are restricted to specific life events, such as medical treatment or a loss of livelihood. In the event of a participant’s death, the payout would go to the designated heirs.
Performance expectations and oversight
Finance officials have described the program as potentially delivering higher medium-term returns than traditional deposits. The investment process is framed as being fully under state supervision, with safeguards and regulatory oversight embedded throughout.
Long-term savings are to be insured in a manner similar to bank deposits, with a coverage amount set at a level that reflects enhanced protection for participants, up to a higher limit than standard deposits.
Additionally, contributions up to a certain annual threshold qualify for tax relief, offering a reduction in tax liability for eligible investors.
Financial resilience
Prime ministers and finance officials have framed the program as a tool to bolster future income potential and to create a financial cushion for households. The mechanism allows a participant to partner with a non-state pension fund, move existing pension savings into the fund for investment, or transfer personal contributions into the new structure.
Under the outlined plan, the state will provide co-financing during the initial three years, up to a specified annual amount, effectively enhancing early-stage growth for participants’ savings portfolios.