Co-financing of Pensions.

18.03.2009

LEGAL UPDATE No. 10.

Goltsblat BLP advises that Federal Law No. 56-FZ dated 30 April 2008 “On Additional Insurance Contributions to the Cumulative Component of Employment Pensions and State Support for the Accumulation of Pension Savings” and Federal Law No. 55-FZ dated 30 April 2008 on relevant amendments to legislative acts of the Russian Federation are now in effect.

Since 1 October 2008, citizens wishing to increase their future pensions may opt to make voluntary additional insurance contributions to the cumulative component of their employment pensions by applying to do so personally or through their employers. The individual can determine the amount of the additional contributions and suspend or resume them at any time.

Along employees who make additional insurance contributions, employers may also decide to contribute extra out of their own funds. Such a decision must be formalised by the employer issuing a separate order or adding relevant provisions to the applicable collective bargaining agreement or employment contract.

Accumulation of pension savings is also supported by the government. Individuals who initiate payment of additional contributions to the cumulative component of their employment pensions between 1 October 2008 and 1 October 2013 will be entitled to government support for a period of 10 years after the year additional insurance contributions are paid in. The amount of the support will depend directly on the amount of the additional contributions made by the individual during the previous calendar year, to a maximum of 12,000 roubles per annum. This pension co-financing programme will be financed out of the federal-level budget, the funds being remitted to the State Pension Fund of the Russian Federation on application by the Fund.

If the individual who has made additional contributions to the cumulative component of the employment pension dies, payments out of the pension savings will be made to the deceased’s successors in the manner envisaged by the laws on employment pensions, on non-government pension funds and on investments to finance the cumulative component of employment pensions in the Russian Federation.

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