By Vladimir Vasiliev
The model is well-known: working citizens and their employers make payments into the budget, forming the pension fund. However, with people living longer, the demographics are become a little alarming. According to Belarus’ Minister for Labour and Social Protection, Marianna Shchetkina, there are 57 pensioners per 100 working people (set to rise to 60 per 100 by 2015 and 67 per 100 by 2020).
President Alexander Lukashenko gave a simple and precise analysis of the figures at a recent meeting, saying, “We have no deficit in the pension fund for our current number of pensioners but we are at the limit, at the edge of what’s sustainable. By world experience, we are right on the edge.”
We need to plan a new model for the years ahead and, of course, are not the first to come across this problem. Almost the whole world is experiencing the same demographic crisis. For most, the solution has been to raise the pension age. Germany has one of the highest, at 65-67 years, while the Poles have men retiring at 65 and women at 60. The Lithuanians retire at 62.5 and 60 respectively while, in Latvia, everyone retires at 62. The Russians and Ukrainians are similar to Belarus, although their resources differ. Nevertheless, they are also considering raising the retirement age.
Should we do the same? Mr. Lukashenko doesn’t think so. “We have promised our people that we won’t do this. In improving the pension system, we won’t follow Europe. Our pensions aren’t high, comparatively. However, taking into account prices, they are no worse than in Russia. We pay them on time and have a big social package for pensioners. In this respect, we appear well. Nonetheless, I admit that pensions should rise.”
As soon as the economy gives a signal, the move will be made. Mr. Lukashenko is uncompromising in this respect. “We shouldn’t begrudge our pensioners anything, so we should raise pensions. The economic situation is developing in such a way that we can raise pensions a couple of times this year, as planned. We should do this.”
Nevertheless, the rising number of pensioners requires us to address the budgetary situation. The Government plans no change to the essence of pensions, since everyone may retire at the same age as they ever have done. However, there are other options. We may continue working while receiving both a pension and salary or postpone drawing on our pension in favour of higher payments at a later date.
On reaching pension age, if you continue working without claiming your pension, you will receive an additional 6 percent of your earnings on your pension after one year. This rises to 14 percent in 2 years, 24 percent in 3 years and 36 percent in 5. For each subsequent year, pensions are to rise by a further 14 percent of earnings. By voluntarily postponing your retirement, you can raise your final pension. Of course, much depends on your strength and ability to work; it must be a personal decision, as the President notes. He explains, “We shouldn’t force people by raising the pension age artificially or administratively. It shouldn’t be done. If you don’t want to postpone your pension, women will maintain the right to retire at 55 and men at 60, as now. However, we can offer another choice.”
The Belarusian leader has told the Government, “There should be no populism: no steps which worsen the financial situation. Simply put, we should have enough money for whatever we choose to do.”
The Government believes it has the finances to fund the new proposal. Of course, there are other choices, such as pension insuring, which are already in partial operation. However, the President is sure that we should develop them gradually and carefully. The state wishes to guarantee pension funds, so proper economic provision is required. We can already give people a real alternative for their retirement but we must calculate everything precisely and scrupulously, accounting for every coin, in order to make the advantages visible to everyone.