Regulation of state and supplementary pension schemes in Russian Federation: overview

A Q&A guide to pensions law in the Russian Federation.

The Q&A gives a high level overview of the key practical issues including: state pensions; supplementary pensions; funding and solvency requirements; tax on pensions; business transfers; participation in pension schemes; and employer insolvency and overall scheme solvency.

The Q&A is part of the Multi-jurisdictional Guide to Pensions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/pensions-mjg.

Contents
 

Pensions

State pensions

1. Do employers and/or employees make pension contributions to the government in your jurisdiction?

Contributions paid to the government

All employees are entitled to a state pension. Pension contributions are included in the social security contributions that must be paid to the national pension fund.

The insurance contribution rates for 2012 to 2016 are as follows:

  • 22% for amounts of payroll not exceeding RUB624,000 for each employee per year and 10% for any further amounts into the Pension Fund.

  • 2.9% into the Social Insurance Fund.

  • 5.1% into the federal and territorial obligatory Medical Insurance Funds.

The age entitling an employee to a retirement pension is 60 years for men and 55 years for women, provided pension contributions have been made for a minimum of five years.

If a person's pension contributions have been made for less than five years an individual is entitled to a social pension. The age entitling a person to a social pension is 65 years for men and 60 years for women. Currently, the amount of a social pension is RUB3,692 per month.

Under the current legislation, the retirement pension consists of an insurance and a cumulative component:

  • The cumulative part of the retirement pension is financed from the amount accumulated in a special section of the individual's personal account. Individuals can select either the Pension Fund of the Russian Federation or non-state Pension Funds as the insurer for the cumulative part of their pensions.

  • The insurance part of the retirement pension is made up of the contributions paid by employers.

In addition, a state pension co-financing programme operates on the basis of Federal Law No. 56-FZ dated 30 April 2008 "On Additional Insurance Contributions to the Cumulative Component of Employment Pensions and State Support for Accumulation of Pension Savings". Under the programme, the government supports the accumulation of pension savings. Individuals who made additional contributions to the cumulative component of their employment pensions between 1 October 2008 and 1 October 2013 are entitled to government support.

Employers can also participate in the programme as third parties and decide to pay employer contributions in favour of insured persons who make additional insurance contributions to the cumulative component of retirement pensions.

Taxation of contributions

Under the Russian Tax Code, the following are not included in the personal income tax base:

  • Pension contributions paid by an employer under non-state pension agreements concluded with a duly licensed Russian non-state pension fund.

  • Insurance contributions for compulsory pension insurance paid by the employer in accordance with Russian Federation legislation.

  • The cumulative component of the retirement pension.

Social pensions, retirement pensions and additional social payments to pensions paid to an individual under the Russian pension laws are not subject to personal income tax.

Pensions paid under non-state pension agreements entered into by individuals with duly licensed Russian non-state pension funds on their own behalf are also not subject to personal income tax.

Pensions paid by a non-state pension fund in accordance with an agreement concluded with an employer, for the benefit of the employee, are subject to personal income tax at the standard tax rate.

Monthly amount of the government pension

According to the information provided by the Pension Fund of the Russian Federation on 1 February 2014, the average amount of the pension is RUB11,400 per month.

Supplementary pensions

2. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? If they do, are they:
  • Occupational (that is, linked to an employment or professional relationship between the plan member and the entity that establishes the plan)?

  • Personal (that is, not linked to an employment relationship, established and administered directly by a pension fund or a financial institution acting as pension provider, where individuals independently purchase and select material aspects of the arrangements, though the employer may make contributions).

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
3. Where supplementary schemes are provided, do these schemes provide pensions, the value of which:
  • Is linked to the employee's salary (defined benefit)?

  • Is linked to employer and/or employee contributions and investment return on those contributions (defined contribution)?

Supplementary pensions are not common in Russia.

Linked to the employee's salary

Supplementary pensions are not significantly regulated by law.

Linked to employer and/or employee contributions

Employers can arrange supplementary pension schemes for their employees through either group pension insurance or supplementary pension funds. However, this is not a common practice in Russia.

In both cases, the additional pension contributions can be made by both employers and employees. The amount and procedure for making the contributions depend on the terms of the insurance agreement or the pension fund conditions.

 
4. For supplementary pensions:
  • Is there a minimum period of service before workers are entitled to receive vested rights?

  • Are there any legal requirements for schemes or providers to index pensions in payment and/or revalue pension rights in deferment?

Minimum period of service

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Legal requirement to index

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 

Funding and solvency requirements

5. In relation to supplementary schemes, are these generally funded or unfunded? If funded, are there any solvency requirements on the sponsoring employer or provider?

Funded or unfunded?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Solvency requirements for funded schemes

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
6. In relation to access for members to the funds in their supplementary pension scheme:
  • To what extent can members transfer their funds to another pension scheme?

  • How do members normally take the benefit of their funds (for example, lump sums, income withdrawals (drawdown), life annuity arrangements)?

  • What are the legal restrictions upon access to the funds (for example, age)?

  • What are the common arrangements for early retirement and ill-health retirement?

  • Are dependants of deceased members entitled to receive benefits payable on the member's death? What form do these commonly take?

Member's transfer of funds

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Taking pension benefits

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Legal restrictions

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Early and ill-health retirement

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Dependants' benefits

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
7. Is there a regulatory body that oversees the operation of supplementary pension schemes? Do any other governance regimes apply to supplementary pension schemes?

Regulatory body

The Ministry of Labour and Social Protection and the Central Bank of Russia are the federal executive authorities exercising control and supervision in the insurance (insurance business) sphere.

Regulatory framework

The federal executive authorities (among other things):

  • Control and oversee the operation of supplementary pension schemes.

  • Enact regulatory and legal Acts.

  • Approve typical insurance regulations for pension schemes.

  • License the activities of Non-Pension Funds.

  • Consider complaints and claims by individuals and legal entities.

The main regulatory Acts in this sphere are:

  • Federal Law No. 75-FZ dated 7 May 1998 "On Non-State Pension Funds".

  • Tax Code of the Russian Federation (Part I, Federal Law No. 146-FZ dated 31 July 1998; Part II, Federal Law No. 117-FZ dated 5 August 2000).

  • Federal Law No. 166-FZ dated 15 December 2001 "On State Pension Coverage in the Russian Federation".

  • Federal Law No. 167-FZ dated 15 December 2001 "On Compulsory Pension Insurance in the Russian Federation".

  • Federal Law No. 56-FZ dated 30 April 2008 "On Additional Insurance Contributions to the Cumulative Component of Employment Pensions and State Support for Accumulation of Pension Savings".

  • Federal Law No. 212-FZ dated 24 July 2009 "On Insurance Payment to the Pension Fund of the Russian Federation, the State Social Security Fund and the Federal Fund of Obligatory Medical Insurance".

Tax on pensions

8. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)?

Tax relief on employer contributions

For personal income tax purposes, an employee's income does not include:

  • Co-financing contributions to pension savings plans made as part of the government support programme.

  • Employer contributions of no more than RUB12,000 annually per employee in whose favour these contributions are made.

Employer contributions paid for an insured person within RUB12,000 per year for each employee are not subject to social fund employer contributions. In addition, these contributions are not included in the corporate profit tax base, provided they do not exceed 12% of the total payroll.

Tax relief on employee contributions

Additional insurance contributions paid by an individual as actual expenditures for the cumulative component of the retirement pension are included in the social tax rebate for personal income tax purposes. The social tax rebate ceiling is RUB120,000.

 
9. Are there any approval or registration requirements with the local tax authority where a supplementary scheme is established?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
10. What is the tax treatment of investments made by the scheme?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
11. What is the tax treatment of pension and lump sum payments made to members?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
12. Are there any other applicable tax charges on schemes?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 

Business transfers

13. Is there any legal protection of employees' pension rights on a business transfer?

Automatic transfer of pension rights

Supplementary pension rights do not transfer automatically in the event of a business transfer. A corporate restructuring by merger or acquisition does result in the transfer of supplementary pension rights together with other rights and obligations acquired by the merged legal entity.

Depending on the model of the supplementary pension programme (pension insurance or pension fund) and the terms and conditions of the agreement between the employer and the provider, employees can receive accumulated sums in the event of employment termination as a result of a business transfer or participate in the programme on their own.

Other protection for pension rights

There is no additional protection provided for pension rights.

 

Participation in pension schemes

14. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
  • Employees who are working abroad?

  • Employees of a foreign subsidiary company?

Employees working abroad

Employees of a Russian company temporarily working outside Russia can participate in a pension scheme established by the company provided they remain on the company payroll. If there are no formal employment relations between the company and the employee, the employee cannot participate in a pension scheme established by the company.

Employees of a foreign subsidiary company

Employees of a foreign subsidiary company cannot participate in a pension scheme established by a parent company in Russia.

 

Employer insolvency and overall scheme solvency

15. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? If the scheme itself is underfunded, are there any funding obligations on connected or associated legal entities?

There is no additional protection provided for pension scheme benefits where the sponsoring employer becomes insolvent.

 

Online resources

Official Internet Portal of Legal Information

W http://pravo.gov.ru

Description. The website is maintained by the Federal Guard Service of the Russian Federation. It is the source for official publication of legal Acts. The website does not provide any translation of the Acts.



Contributor profile

Olga Chislova, Counsel

Freshfields Bruckhaus Deringer LLP

T +7 495 785 30 00
F + 7 495 785 30 01
E olga.chislova@freshfields.com
W www.freshfields.com

Professional qualifications. Russian Federation, Lawyer, 1996; Case Western Reserve University, 1996 – 1997, OH, USA, LLM; St. Petersburg State University, 1990 – 1996, Law School

Areas of practice. Employment, pensions and benefits; migration; personal data protection.

Languages. Russian, English, Swedish, German.

Recent transactions

  • Advising major international corporations and companies on various aspects of Russian employment, pension and migration law in connection with establishing and managing business in Russia.

  • Advising on a wide range of HR issues in relation to re-organisation or liquidation of companies' legal representations in Russia, including dismissals and redundancies.

  • Advising multinational companies on structuring and implementing various complex bonus and stock option plans and other incentives.

  • Representing companies in employment related judicial and extrajudicial disputes.

  • Advising banks, representative offices of foreign banks and professional participants of securities' markets on special regulatory requirements for employees of such companies.

Publications

  • Foreign employers: playing on a foreign (Russian) legal field, Trudoviye Spory, October 2010.

  • Labour and Employment Law in Russia, International Labour Book and Employment Law, Second Edition, Volume II, Section of International Law American Bar Association.

Elizaveta Blaschuk, Associate

Freshfields Bruckhaus Deringer LLP

T +7 495 785 30 00
F + 7 495 785 30 01
E elizaveta.blaschuk@freshfields.com
W www.freshfields.com

Professional qualifications. Russian Federation, Lawyer, 2009; Moscow State University, Law School, 2005 – 2009.

Areas of practice. Employment; pensions and benefits; migration; personal data protection

Non-professional qualifications. Diploma in theoretical and applied linguistics, Moscow State University

Recent transactions

  • Advising major international companies on a wide range of matters related to employment, including establishing and managing subsidiaries, branches and representative offices in Russia, hiring and dismissing of the employees, transfer of employees and reduction of personnel.

  • Advising on protection of employees' personal data, employer's commercial secrecy and transfer of intellectual property between the employer and the employee.

  • Conducting due diligence projects with respect to subsidiaries, branches and representative offices of international companies aimed at identifying employment related risks and advising on further risk management.

Languages. Russian, English, Swedish, French.

Publications

  • A Cheapskate Pays Twice. A Prudent Employer, Just 2/3, The Moscow Times, July 2008.

  • Employee on a probation period. How to prove his professional unsuitability, Trudoviye Spory, July 2013.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247921215962", "objName" : "Pensions in Russian Federation overview", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/1-549-8089?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "25e8a493e:15b1865425a:-76e6", "analyticsSessionCookie" : "25e8a493e:15b1865425a:-76e5", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }