The increase in the retirement age in Russia, which is taking place between 2019 and 2028, was a necessary response to demographic changes and has generally helped to stabilize the budget system, but it carries serious social risks. This is the conclusion reached by Angelina Shpilevaya , Researcher at the Gaidar Institute's Mathematical Modeling of Economic Processes Department, who presented the results of a study on the macroeconomic consequences of the reform.
Speaking about the reasons for the changes in the pension system, Angelina Shpilevaya noted that the decision was a response to long-term demographic changes. According to her, over the past decade, Russia has seen an increase in life expectancy at birth and a decline in the birth rate, which has led to an increase in the proportion of people of retirement age in the total population. As a result, the number of workers per pension recipient is decreasing, and the burden on the social security system is increasing. Russia has a pay-as-you-go pension system: current payments to pensioners are financed by insurance contributions and taxes paid by the current generation of workers. In such conditions, maintaining the specified level of pension provision requires either additional sources of funding or adjustments to the parameters of the system. An additional important circumstance is the observed dynamics of the replacement rate: according to actual data, it decreased from 33% in 2018 to 26% by 2024.
According to the expert, assessing the macroeconomic consequences of such a reform is a methodologically complex task, since the reform affects not only the parameters of the pension system, but also the economic behavior of households and firms. Changes in retirement rules affect incentives to continue working and, through this, consumption and savings. These changes are then reflected in aggregate demand, investment activity, and output. At the same time, the structure of tax revenues in the budget changes due to changes in personal income tax and insurance contributions, as well as a reduction in pension payments, which affects the budget balance.
To retrospectively assess the consequences of the already initiated reform to raise the retirement age, as well as to analyze alternative scenarios for economic development under different parameters of the pension system, the Gaidar Institute constructed a dynamic OLG model of general equilibrium. It allows comparing the trajectories of key macroeconomic indicators in two situations: with the reform being implemented and in a hypothetical scenario where the reform had not been implemented.
The study showed that the measure is effective in terms of fiscal stabilization. Angelina Shpilevaya noted that in the baseline scenario after 2024, the replacement rate is assumed to be 25%. Model calculations show that without raising the retirement age, additional funding equivalent to an increase in the VAT rate of approximately 2 percentage points would be required to maintain this payment trajectory. At the same time, the impact on output is estimated to be moderate: at the end of the transition period, the increase in GDP is about 1.2% compared to a scenario in which the reforms would not have been implemented.
An important conclusion highlighted by the expert concerns the behavioral responses of the population. According to her, raising the retirement age by five years does not lead to a comparable shift in people's actual behavior. The model estimates an increase in the average actual retirement age of approximately one year for women and 0.5 years for men. She explained this by two factors: first, a significant part of the population worked longer than the established retirement age even before the reform; second, for high-income groups, the state pension is not a determining factor in the decision to stop working.
The expert particularly emphasized the risks of inequality in various pension indexation scenarios. According to the model's projections, if the cost of pension benefits is indexed only to inflation without taking into account real wage growth, the replacement rate could fall to 0.2 by 2040 and to 0.16 by 2050, and inequality, calculated on the basis of disposable income, would increase. Low-income groups are the most vulnerable in this situation, as their consumption in retirement depends more on pensions and government transfers. The risks are higher for women because their lifetime earnings and savings are generally lower, while their life expectancy is higher, which increases the importance of a stable pension income over a longer period.
In conclusion, Angelina Shpilevaya emphasized the need for a set of measures to mitigate social costs. In her opinion, the reform must be combined with targeted support for vulnerable groups, guaranteed indexation of pensions in line with real wage growth, and measures to increase labor market flexibility for the older generation.