Transformation of Nongovernment Pension Funds into Joint-Stock Companies Is a Reasonable Proposal

Anton Siluanov, Finance Minister of Russia confirmed that nongovernment pension funds (NPF) which manage citizens’ voluntary pension savings should be transformed into joint-stock companies and have the same supervisory requirements as NPF.

In carrying out the pension reform, NPF were transformed into non-profit organizations. The above decision was taken in accordance with the political situation because it was believed that making money on pensions was incorrect. As a result, NPF were not motivated to increase returns on citizens’ pension savings because nonprofit organizations are not supposed to make profit.

On the contrary, NPF were interested in maximizing administrative costs as it permits them to pay the management which is normally formed by the founders. As a result, due to overstaffing and too high wages and salaries of their personnel NPF had to reduce returns on pension savings.

The effort to transform NPF into for-profit organizations is a reasonable decision as it permits to raise the founder’s responsibility, form an adequate charter capital to ensure the minimum guarantees that business is carried out in good faith, reduce costs and increase profitability of savings.

Incidentally, in the international practice NPF have the form of either joint-stock companies or trusts, that is, funds without establishment of a legal entity.

V.S. Nazarov, Head of the Budget Federalism Department