- THE PENSION SYSTEM: A MODEL FOR RUSSIA AND INTERNATIONAL EXPERIENCE
- Modeling the Pension System of the Russian Federation
- 7. The Modeling Program
- Modeling the Pension System of the Russian Federation
7. The Modeling Program
This work includes large-scale modeling of the RF pension system under different demographic and macroeconomic development scenarios. The basic scenario uses the following indicators, which largely determine the prospects of pension provision:
1. The demographic scenario is the middle scenario of the RF Goskomstat.
2. The macroeconomic parameters (wage and GDP growth rates) were borrowed from the forecast of the RF Ministry for Economic Development and Trade.
3. The macroeconomic forecast provided the number of wageworkers indirectly determined by the size of the wage fund (WF) and average wage.
4. Retirement age is taken as constant (60/55) throughout the forecasting period.
5. The number of early (privileged) pensioners gradually diminishes in conformity with the draft law on professional pension schemes. Basic pension indexation is to the inflation of retail prices.
6. NDC pension indexation is in conformity with the current law, that is, in accordance with the RF Pension Fund revenues directed into the payment of NDC pension.
7. Real (over and above inflation of retail prices) profitability of investments under the funded element of labor pension is taken as 7%.
When drafting supplementary modeling scenarios:
1. We used the low and the high (pessimistic and optimistic) RF Goskomstat demographic scenarios and a supplementary, “extra-high” scenario, as well as combined scenarios, where birth rate and longevity were taken from different demographic scenarios, e.g. the basic birth rate was combined with extra-high longevity.
2. Retirement age varied. The following versions were used as supplementary:
· 60 years as retirement age for both men and women;
· 65 years as retirement age for both men and women.
3. Wage growth rate varied.
4. Investment profitability under the funded element of labor pension varied.
5. The present share of early pensioners and the abolition of this category were considered.
6. Other versions of indexation of basic and NDC pension were considered, etc.
Modeling outcomes were examined in the following order. First we analyzed the various demographic and macroeconomic forecasts; this involved examining the indicators having the greatest significance in terms of individual pension system elements: the old age dependency ratio, residual longevity at the date of retirement, wage growth rate, and investment profitability. We went on to make separate analysis of the PAYGO and the funded elements of the pension system, and summed up the modeling outcomes.
