Planning your Russian retirement

If you are planning to retire in Russia, it’s important to plan everything in advance.

From this guide you will know everything about retirement in Russia. It consists of retirement age in Russia, the Russian pension system, recommended insurance and so much more.

What is the Russian pension system?

A pension is a payment for the material support of citizens in old age, which is paid monthly and guaranteed in the event of disability, loss of a breadwinner, or in connection with reaching a certain length of service in certain areas of work.

The Russian Federation has a mandatory pension insurance system and a state pension provision system. This means that a pension is guaranteed to all Russians. You will also have to form a pension in the mandatory pension insurance system, so carefully consider what it consists of and how it is structured.

Participants in the pension system:

INSURER

The key participants in the pension system are employers, or insurers. These are organizations of various forms of ownership, individual entrepreneurs, heads of farms, notaries, lawyers, etc. Insurers pay monthly insurance premiums for the future pension provision of their employees. The general rate of insurance premiums is 22% of the wage fund of each employee. Insurers transfer insurance premiums both within the framework of mandatory pension insurance, and additional ones.

The main administrator, or insurer, in the compulsory pension insurance system (CPI) is the Pension Fund of Russia. It manages pension funds in the CPI system. Along with the PFR, a non-state pension fund (NPF) can act as an insurer, but only for the formation of a funded pension.

The Pension Fund of Russia keeps records of citizens’ pension rights, the assignment and payment of pensions.

INSURED PERSONS

Insured persons are citizens of the Russian Federation, as well as foreign citizens and stateless persons permanently or temporarily residing on the territory of the Russian Federation, including:

• working under an employment contract or a civil law contract (this is how most people work – hired workers);
• self-employed (individual entrepreneurs, lawyers, notaries engaged in private practice, farmers);

• working outside the Russian Federation and paying insurance contributions to the Pension Fund of Russia.

Every officially employed person is an insured person.

History of pensions in Russia:

The first mentions of state pension provision in the territory of modern Russia date back to ancient times. As noted in the chronicles, the princes and commanders of the Slavic squads took care not only of the food and weapons of their subjects, but also of their provision in case of injury and in old age. Thus, social guarantees for retired soldiers were gradually laid down. From ancient times and up until the 19th century, pension provision was selective in nature and existed as a favor of the ruling person to his subjects. Only the most important members of society for the authorities were awarded pensions – warriors who stood guard over the princely, then royal possessions.

XVII CENTURY

1663

The first cash payments for retired soldiers (“medical”) began to be made under Tsar Alexei Romanov, in 1663. Their size depended on the severity of the injuries received. A more common form of social support for soldiers who left service due to injury was the provision of estates or an addition to existing lands.

XVIII CENTURY

1720

PETER I

For the first time, regular pension provision was introduced by law. It was distributed primarily to the highest military class. The document that approved the grounds and procedure for paying pensions was the Naval Regulations of January 13, 1720. This document is considered to be the first pension law.

1726–1796

CATHERINE II

Her reign was marked by the implementation of the first national pension reform: for the first time, the concept of length of service, or work experience, began to be used, which had to be at least 20 years.

1796–1801

PAUL I

The Emperor established a rule according to which military pensioners, upon entering civil service, were entitled to state allowances in such an amount that the salary would not be less than the pension.

XIX CENTURY

1820

In the 1820s, the Charter on pensions and lump-sum benefits for state (military and civil) employees was adopted. It was then that a centralized pension fund was created within the Ministry of Finance, the main function of which was the payment of pensions and benefits.

In the second half of the 19th century, pension payments began to be extended to workers in private enterprises. In some industries, the government required the creation of so-called emeritus funds, that is, monetary funds for the payment of pensions and benefits to retired fund participants. Funds from the funds were paid in addition to the state pension. The assignment of pensions was still largely selective and covered only a third of the population. Pensions for length of service were received by officials of all departments, some officers, teachers and lecturers, workers in state-owned factories, as well as scientists, engineers, doctors and paramedics of state-owned enterprises.

XX CENTURY

1917

The course is set to make pension payments mass. From the first days of Soviet power, payments of disability benefits and survivor’s benefits were made. In the same year, the decree “On the issuance of percentage supplements to military pensions” was issued.

1918

A resolution was issued “On approval of the Regulation on social security of workers”.

1924

A pension provision for length of service has been introduced for research workers and university teachers.

1925

Pensions for length of service were established for teachers of urban and rural schools. The size of the pension depended on the size of earnings, working conditions, and family composition.

1930

The Regulation on Pensions and Social Insurance Benefits was adopted. The pension system was replaced by the social insurance system. All organizations paid taxes to the state, which formed the country’s budget. The budget was used to cover all state needs: construction of roads, factories, and payment of pensions to citizens.

1997

Creation of a system of personalized accounting of citizens’ pension rights. It improved the quality of pension system management by introducing individual personal accounts, on which all information about a person’s work activity is recorded electronically.

XXI CENTURY

The result of reforms carried out in the late 1990s and early 2000s was an updated three-tier pension system, which has been in effect since 2002. It provides for insurance, state and non-state pension provision. The key factor in forming a pension in the new system was insurance contributions transferred by the employer for the employee during his working life. A new element was introduced in the pension system – the funded part of the labor pension. The funds received for it are invested in investment assets and thus increase.

Types of pensions:

1. INSURANCE PENSION

Most Russians today have a so-called insurance pension. Mandatory pension provision, which covers all working Russians, is based on insurance principles. An insurance pension is a monthly cash payment to compensate people for wages and other payments lost due to incapacity due to old age, disability, or loss of a breadwinner.

THERE ARE THREE TYPES OF INSURANCE PENSION:

– IN OLD AGE

This pension is received by those who lose the ability to work due to reaching a certain age.

– FOR DISABILITY

This type of pension is awarded to those who are disabled due to serious health problems, and not due to age.

– IN CASE OF LOSS OF BREADWIFE

This type of pension is provided for disabled family members of a deceased person for whom an insurance pension was formed.

CONDITIONS FOR RECEIVING AN OLD-AGE INSURANCE PENSION:

– REACHING RETIREMENT AGE

In 2022 — 56.5 years for women and 61.5 years for men. Then the retirement age will gradually increase to 60 years for women and 65 years for men by 2028.

– HAVING A MINIMUM INSURANCE PERIOD

In 2022 – 13 years. Then the requirements for the minimum length of service will increase so that by 2024 it will be 15 years.

– AVAILABILITY OF MINIMUM PENSION COEFFICIENTS

In 2022 — 23.4 coefficients. Further, the requirements for the minimum number of coefficients will increase and by 2025 will amount to 30 pension coefficients.

GENERAL TARIFF OF INSURANCE CONTRIBUTIONS FOR COMPULSORY PENSION INSURANCE

22 % = 16 % + 6 %

INDIVIDUAL TARIFF + SOLIDARY TARIFF

INDIVIDUAL TARIFF for the formation of an insurance pension

The funds received at this rate are reflected in the personal account of each working person.

If the employee’s salary fund is 30,000 rubles per month, the employer will send funds to his insurance pension in the amount of: 16% OF 30,000 RUB. = 4,800 RUB.

These receipts are automatically converted into pension coefficients. The funds themselves are sent to pay those who have already become pensioners – our grandmothers and grandfathers.

1. SOLIDARY TARIFF for the formation of a fixed payment

It is intended to form the funds necessary to finance a fixed payment to pensioners on a national scale. Such a system, in which the insurance contributions of the working generation go to pay current pensions, is called solidary. When you retire, it will be paid to you at the expense of the contributions of your children and grandchildren. So that the pension rights of future pensioners do not depreciate, the state annually increases the cost of the fixed payment. In this way, the insurance pension increases – annual indexation.

SOCIAL PENSION

2. Not everyone is entitled to an insurance pension. This may happen for various reasons. For example, if a person has been disabled since childhood and cannot work or, due to life circumstances, has not acquired the necessary insurance period and pension coefficients to receive an insurance pension. Such citizens will have the right to a social pension. The age at which the right to a social old-age pension arises is also gradually increasing, as is the retirement age for an insurance pension. By 2028, a social old-age pension will be assigned to men upon reaching 70 years of age, and to women upon reaching 65 years of age. At the same time, there are no requirements regarding insurance period or pension coefficients for receiving a social pension. A social pension is a state pension and is paid from the federal budget.
3. FUNDED PENSION

The funds that form the funded pension are called pension savings. They are more similar to bank deposit funds than the funds that form the insurance pension. But until a person becomes a pensioner, he will not be able to use pension savings. Pension savings do not go to the solidarity system for the payment of current pensions. They are transferred by the Pension Fund of Russia to the management company or to a non-state pension fund – at the choice of the future pensioner. Then these funds are invested to generate income.

4. VOLUNTARY PENSION

Along with the state system of mandatory pension insurance in Russia, there is voluntary pension insurance, within the framework of which Russians have the opportunity to form another pension. To receive such a pension, a future pensioner must enter into an agreement with a non-state pension fund and make personal contributions for a certain period of time. If an employer makes deductions for the voluntary pension of its employees, such a pension is called a corporate pension.

Is it possible to be left without a pension?

Is there a problem of under-recruitment of pension coefficients, which could result in one being left without a pension?

An insurance pension is assigned if the minimum required coefficients and length of service are available. If the employer does not formalize the employment relationship with the employee officially, if he pays the entire salary or most of it “in an envelope”, then contributions to mandatory pension insurance are either transferred in a smaller amount or are not paid at all. Consequently, the minimum pension coefficients are accrued for the year, the length of service may not be counted, and the future pension is formed very slowly.

Most Russians who are set to retire in the coming years already have the required number of coefficients.

The average length of service in Russia at retirement is more than 30 years. Even with a minimum salary, during this period you can earn a number of coefficients exceeding the minimum required. If for some reason a person does not receive the right to an insurance pension, he or she has the right to a social pension upon reaching 61.5 years for women and 66.5 years for men (the age increases annually until 2028). So no one can be left without a pension.

Pension formula

The old-age insurance pension today is calculated according to the following formula:

A × B + C = old-age insurance pension

• PENSION COEFFICIENTS

The pension is formed from the moment you start working. Every year, the employer will transfer pension insurance contributions for you. These contributions are automatically converted from money into pension coefficients (variable A in the formula).

The pension coefficient is a parameter that evaluates each year of a person’s working activity, taking into account annual deductions of insurance contributions.

The number of pension points you can earn will depend on your salary: the higher it is, the more pension points you will have. The maximum number of pension points you can generate per year is 10.

The more pension coefficients accumulate during life, the higher the insurance pension will be!

B – COST OF COEFFICIENT

The value of the pension coefficient is set by the state and increases annually.

From June 1, 2022, the value of the pension coefficient has increased and is 118.10 ₽.

Upon retirement, all accumulated pension coefficients are converted into money by multiplying their number by the cost of one coefficient (variable B in the formula) in the year of retirement.

A fixed payment (variable C in the formula) is also added to the insurance pension. Its name speaks for itself. It is a fixed amount established by law, which is guaranteed to be paid to the insurance pension. Every year, the fixed payment, as well as the value of the pension coefficient, is indexed by the state.

From June 1, 2022, the fixed payment has been increased and is 7220.74 ₽. The amount obtained after adding the cost of pension coefficients and the fixed payment will determine the amount of the insurance pension that a person will receive monthly after retirement.

Premium odds

Each future pensioner has the opportunity to additionally increase the amount of the old-age insurance pension due to premium coefficients. If you apply for it after the corresponding right has arisen, the number of accumulated pension coefficients will be increased by a special coefficient.

PENSION AMOUNT

Application for pension in the year of the right to it 18,521 ₽

PENSION AMOUNT

Application for pension 5 years later + 40%

When to Start Saving for Retirement

The universal advice is this: if you are thinking about retirement, you can start saving – and it doesn’t matter how old you are. The earlier you start, the more time you will have to accumulate the required amount and get additional income from it, which will then also become part of the pension.

But if you’re under 30 and actively building your career, you might want to invest in your professional growth instead of saving for retirement. That way, your salary will grow along with your skills, and you’ll be able to save more for retirement.

How old-age pension is calculated: basic rules

The pension consists of an insurance and a fixed part.

The fixed amount is set by the state and depends on several factors: age, region, number of dependents, disability. Currently, the average fixed payment is 8,134.88 ₽. This amount varies depending on the category: for example, people over 80 years old are awarded 16,270 ₽.

The insurance portion is calculated based on age, length of service and pension coefficients – points that are awarded for each year of work or socially significant activity, such as parental leave.

All about pensions: what they are, what they depend on and how to get more

Retirement age. In 2019, pension reform began in Russia: the retirement age was raised by five years – to 60 for women and 65 for men. But it was decided to increase it gradually. In 2024, the retirement age will be 58 and 63 years, and people will start retiring at the planned 60 and 65 years in 2028.

Work experience. It includes years when a person was officially employed according to the labor code, and social periods, such as caring for children or elderly relatives. Since 2025, the minimum work experience is 15 years.

The longer the work experience, the higher the pension.

Pension coefficients. They are accrued for each year worked and summed up. You can find out how many coefficients you have accumulated on the State Services website.

The coefficient has a cost: in 2024, one coefficient costs 133.05 ₽. This means that when calculating the pension, the number of coefficients is multiplied by their cost and thus the amount is obtained, which is added to the fixed part.

The final amount of the old-age insurance pension is calculated using a formula using pension coefficients.

You can also find out the size of your future pension using the calculator on the Social Fund website.

The calculator calculates the preliminary pension size based on your length of service and the number of pension coefficients on the date of the request.

In order not to depend on the state pension, you can prepare and make your own savings. According to VTsIOM, 62% of people aged 18 to 34 have already begun to form a safety cushion for the future.

When to Start Saving for Retirement

The universal advice is this: if you are thinking about retirement, you can start saving – and it doesn’t matter how old you are. The earlier you start, the more time you will have to accumulate the required amount and get additional income from it, which will then also become part of the pension.

But if you’re under 30 and actively building your career, you might want to invest in your professional growth instead of saving for retirement. That way, your salary will grow along with your skills, and you’ll be able to save more for retirement.

How much to save for retirement

• To understand how much to save for retirement, you need to decide:
  What amount will be enough to live on. It is important to be realistic here: if you currently earn and spend 50,000 ₽ per month, you should expect to receive a pension of approximately this amount. If you earn 50,000 ₽ and set a goal of 500,000 ₽, you will not be able to save up such an amount.
• At what age do you plan to retire, that is, stop working.

How long do you plan to live? Here you can base your life expectancy on the average in Russia – 73 years – or simply on your plans: if you want to live to be a hundred, focus on that age, not on statistics.

Savings principles

If we simply keep cash at home, we have to put aside a lot every month. The problem with this method is that such savings are not protected from inflation: over time, goods and services become more expensive – and if now you can buy a computer with your pension savings, then in 20 years, this money may only be enough for a jacket. And in this case, the money does not bring in additional income.

Therefore, the main principle of savings is to invest money in something to protect it from inflation and, if possible, increase it. This is called compound interest: money brings interest, which is added to the principal amount, and then interest is calculated on the interest already received.

What to invest money in

There are several options. The most obvious is a bank deposit. This is a popular way to save because banks charge interest on deposits that covers inflation.

Deposits are a safe way to save for retirement. But there is a more profitable instrument – investing in securities.

To invest money, you will need a brokerage account. With its help, you can invest savings in shares, funds, bonds and other assets and receive a higher return than on deposits, and invest the income received in new assets to quickly accumulate the required amount.

But the return on the stock exchange is not always stable: securities sometimes rise in price, sometimes fall. Therefore, before investing, you need to understand how the stock market works, what shares and bonds are, how to put together an investment portfolio. In addition, it is important to regularly buy assets and sell illiquid securities.

Securities

Many financial market instruments allow you to earn more than on bank deposits. Especially if you are ready to invest for a long term. However, investments can bring not only profit, but also losses. And the higher the potential profitability, the greater the likelihood of losing money.

In addition, the stock market sometimes experiences crises that affect all securities, including the most reliable ones. For example, after the introduction of sanctions in 2022, shares and bonds of even the largest Russian companies lost value, and foreign securities of millions of people were frozen abroad – investors cannot dispose of them and receive income from them.

To find a reasonable balance between benefits and risks, you need to develop a clear plan of action on the stock exchange and follow it methodically.

Savings in a non-state pension fund (NPF)

NPFs are created specifically to help people save money for old age. Funds can invest the money of future pensioners in reliable instruments with low risk. Moreover, professional managers choose the assets and decide when to buy and sell them. You will not have to delve into the specifics of the stock market and invest on your own.

The money you contribute to your future pension can be partially returned using a tax deduction. And the amount of the return can also be added to your savings in the NPF. This will increase the profitability of your savings.

You can choose a suitable individual pension plan: determine how often and what amounts to contribute, how to receive an additional pension – for life or for a certain period.

The savings in your pension account, like bank deposits, are insured by the state. In case of problems with the fund, you are guaranteed to be paid up to 2.8 million rubles.

If the NPF goes bankrupt or its license is revoked when you have already started receiving your pension, the payments will continue. They will simply be transferred to you by another fund, but the amount of payments may change. The maximum amount provided by law is four social old-age pensions. In some cases, the payments may be higher, but everything will depend on the financial situation of your previous fund.

When you intend to save more than 2.8 million rubles and receive payments that exceed four social pensions, it is safer to distribute savings between several NPFs.

It is worth considering that investments of funds in reliable instruments, as a rule, result in low profitability. And if the fund invests unsuccessfully and cannot even outpace inflation, then the savings will partially depreciate by the time of retirement. With independent investment, there is a chance to get a more solid profit than with the help of NPF, although the risks of losses will be higher, and you will have to spend more time and effort.

Cumulative life insurance (CLI)

Insurance companies offer life insurance policies that allow you to save and receive financial protection in the event of illness, injury or death.

You can pay for such a policy immediately or make regular payments of a size convenient for you. You also determine the payment schedule yourself – one payment upon retirement, over several years, or for life.

Insurers usually guarantee a small income for such policies – 1-3% per annum. Under some contracts, the insurance company annually determines how much it will charge to clients – it all depends on how successfully it invested your money.

In some cases, the benefit from investments can be increased by a tax benefit. You can exempt up to 150,000 rubles of your annual income from personal income tax if you spend this money on a five-year or longer life insurance policy. You will learn how much you can get back and how to do it from the text “Tax Deduction”.

Although the profitability of life insurance often does not cover inflation, such investments have their own advantage. In the event of the client’s death, the company pays his relatives an insurance compensation. As a rule, this is exactly the amount that the person wanted to save.

For contracts with a term of up to 7 years and a contribution amount of up to 1.5 million rubles, the Bank of Russia has set a minimum that companies are required to pay in the event of the client’s death. It is calculated using the formula: the full price of the policy or payments for the first year are multiplied by a coefficient from 1.1 to 20.9. The table of coefficients can be found in the regulator’s instructions.

Sometimes the contract stipulates that in the event of the client’s death, disability or serious illness, the insurance company will continue to make contributions for him. And by the time the contract expires, the policyholder or his relatives will receive exactly the amount that the person planned.

But you need to study the life insurance contracts very carefully. Often, policies provide for regular payments during the accumulation period. If you stop making them, the insurer can terminate the contract and pay you a surrender value that will be even less than the money you have already contributed.
The state does not guarantee the safety of contributions to life insurance, so you need to choose an insurance company very seriously: study its financial situation and investment successes over the past years.

Real estate

This option can provide a stable income, but it cannot be considered absolutely risk-free. After retirement, you can rent out the apartment and receive a fairly stable income or sell it and get a significant amount right away.

But it is important to consider that the real estate market does not often, but there are crises when property loses value. And in a small town it is sometimes not easy to sell or rent an apartment. As a result, your income from real estate may be lower than you expected, and you will have to pay taxes and utilities in any case.

In addition, if real estate is your main source of income, it is worth protecting it: insure the housing itself, and better yet, liability to neighbors – if their apartment is damaged due to the fault of your tenants, you will not have to compensate for the damage. At the same time, it is a good idea to stock up on cash in case of a break in rent or repairs.

Combination of different financial instruments

You can use several savings options at once. For example, put part of your savings on deposit in a bank, plus buy government bonds through an individual investment account and receive an investment tax deduction, and additionally issue an NSL policy or enter into an agreement with a reliable NPF and take advantage of the social deduction.

Individual pension plan

An individual pension plan is a long-term savings tool for receiving an additional pension. It is formed by the client’s contributions to the fund and investment income from these contributions. With the help of an individual pension plan, you can save a large amount.

Any citizen of the Russian Federation over 18 years of age can apply for an individual pension plan; for this, a passport and SNILS are required. To apply for an individual pension plan for another person, their passport will also be required (for those under 14, a birth certificate).

Those employed can apply a tax deduction and return part of the personal income tax – the tax that the employer pays from the employee’s salary. In this way, you can receive up to 15,600 ₽ from the state if you contribute up to 120,000 ₽ per year to a pension account.

How an Individual Pension Plan Works

You sign an agreement and transfer the first installment: according to the terms of the program, from 50,000 ₽ when applying at the office or from 15,000 ₽ online.

The fund invests this money in reliable assets with high growth potential.

You make additional contributions when it is convenient for you.

Once a year, the fund accrues income on your contributions. The average annual return on pension accounts of participants in the individual pension plan for the period 2021-2022 was 7.84%.

When you reach retirement age, you determine the frequency and duration of payments yourself.

There are four ways to contribute to an individual pension plan:

1. In Gazprombank offices and via the mobile application.

1. In the fund’s personal account, by bank card or using the Fast Payment System (FPS) without deducting a commission.
2. Through your employer. To do this, you need to submit an application to the accounting department to withhold the pension contribution from your salary.
3. Connect autopayment. This can be done through a bank employee, on the fund’s website in your personal account, or in the fund’s mobile application.

You can also apply for a joint Gazprombank and NPF GAZFOND pension savings card with cashback. Cashback is transferred monthly to your pension account.

How income is calculated and a pension is assigned under an individual pension plan:

Investment income is accrued annually. You can view the status of your pension account on the fund’s website in your personal account. The client chooses the frequency and duration of pension payments:

Duration:

– for life;

– for several years;

– until the funds in the pension account are exhausted (at least 1 year).

Frequency:

– monthly;

– quarterly;

– once every six months.

Retirement age in Russia

To get a Russian pension you should earn a salary in Russia for at least 5 years. The Social Fund of Russia offers different Russian pension schemes.

Retirement age in Russia is 60 years for men and 55 years for women. It is lower than many other European countries. However, the government may change the Russian retirement age during the next pension reforms.

Transferring an international pension to Russia

If you are a foreigner who can not claim a pension in Russia then you can live with your international pension. Russia has social security arrangements with some countries.

Expatriates retiring in Russia who cannot claim a Russian pension can live off an international pension. Russia has social security arrangements with some countries that are applicable to state pensions. If you have a private pension, you must check your policy to determine if there are any tax obligations in Russia.

International pension funds cannot be transferred to Russia directly; you typically must use an offshore account. These types of pension funds meet a set of minimum standards as prescribed per country of origin.

However, Russia has a strict exchange control and many banks charge a percentage fee on withdrawals. If you are living in Russia on a foreign pension, you may not be entitled to draw money from the bank without incurring exchange rate charges.

Taxes on pensions in Russia

If you live in Russia for more than 183 days in a 12-month period, any pension you receive in Russia is subject to personal Russian income tax. Tax is charged at a rate of 13% if you have a residential permit. Non-residents are taxed at 30%. Read more on the Russian tax system.

Net wealth and net worth taxes, as well as inheritance tax, are not levied in Russia. There is also no tax on foreign pension schemes upon the death of the individual. However, beneficiaries of the deceased’s pension have to pay income tax from the earnings accrued from a foreign pension scheme.

Health insurance for retiring in Russia

Foreigners living, working, or retiring in Russia must purchase private health insurance. You will typically have to show proof of private healthcare in order to apply for a residency visa.

If you work in the country before retirement age and contribute to the compulsory Russian pension system, you will also have to contribute 1.2% of your earnings to Russian healthcare. This is to pay for free healthcare treatments and hospital services, which foreigners may claim if they have a permanent residential visa.

Where to retire in Russia

Russia covers nine time zones and is the largest country in the world in terms of land mass. Although the vast majority is the uninhabitable wilderness beyond Siberia, there are still ample choices for expats to retire in Russia.

In fact, Russia has a wealth of irresistible cities that attract expats. While Moscow and St Petersburg remain high on places to live for expats, other popular places include cities such as Krasnodar, Krasnoyarsk, Kazan, Rostov-on-Don, Khabarovsk, Novosibirsk, Yekaterinburg, Yaroslavl, Bashkortostan, and Perm.