RETIREMENT STRATEGIES OF RUSSIANS ( ) Olga Kuzina Higher School of Economics, Moscow

Retirement strategies Do people have an idea about the amount of their future state pension? Do they think that their state pension will be enough to make their ends meet? Do they expect to have additional sources of income? What are these sources? How many do make any financial provisions for their retirement? From which sources do current pensioners draw their incomes? Do people know anything about the state program of co-financing the retirement savings? What do people think about this program? How many do participate? How are people going to ensure that their incomes will be sufficient to provide them an acceptable level of living?

% Male45 Female All-Russian surveys N=1600 Sample error - 3,4% Data description Waves 2005 – ZIRCON 2007 – НАФИ HSE 2010 – HSE In all waves the same question wording and sampling methodology was used

RETIREMENT INCOME STRATEGIES OF PEOPLE OF WORKING AGE

When you will retire do you think that the level of your pension will be enough to live on? % of people of working age RETIREMENT INCOME EXPECTATIONS – VERY FEW ARE SURE THAT THEY WILL BE ABLE TO LIVE ON THE STATE PENSION

The level of retirement confidence in the USA

RETIREMENT INCOME EXPECTATIONS DO NOT DIFFER ACROSS AGE GROUPS 25+ When you will retire do you think that the level of your pension will be enough to live on? % in age groups, 2010

RETIREMENT INCOME EXPECTATIONS DO NOT DIFFER ACROSS QUINTILE INCOME GROUPS When you will retire do you think that the level of your pension will be enough to live on? % in quintile income groups, 2010

Do you expect that apart from the state pension you will receive additional income from other sources? % of people of working age RETIREMENT INCOME EXPECTATIONS – EVERY SECOND EXPECT TO RECEIVE INCOMES FROM OTHER SOURCES

TYPES OF ADDITIONAL INCOME SOURCES IN RETIREMENT, % OF THOSE WHO EXPECT TO HAVE INCOMES FROM OTHER SOURCES IN RETIREMENT Continue to work in my profession Continue to work, will find a job to be able to do My spouse will continue working in retirement Expect that my children will help me Hope to get help from charity foundations 0,50,7 0,5 Self-provision Consider moving to a smaller (cheaper) apartment (house) to use the difference for consumption as the need arises 0,6220,7 Receive income for renting out my real estate property 2334 Plan to use my savings 5958 Plan to receive a supplementary pension from the private pension fund or life insurance policy 3435 Expect to receive inheritance 2343 Do not know now, will think about it later Something else 1112 Total (over 100% because this question allowed multiple choice answers) N

AGGREGATIVE ANSWERS, % OF THOSE WHO EXPECT TO HAVE INCOMES FROM OTHER SOURCES IN RETIREMENT Work Help Financial tools Self-provision Real estate 3444 Do not know Other 1112 N

TYPES OF ADDITIONAL INCOME SOURCES IN RETIREMENT, % OF PEOPLE OF WORKING AGE Work Help Financial tools 5858 Self-provision 9864 Real estate 2222 Do not know what these sources will be 8837 Other 1101 Do not expect to have additional incomes in retirement Do not know if will have additional incomes in retirement N

RETIREMENT INCOME STRATEGIES OF PENSIONERS

TWO THIRDS OF PENSIONERS DO NOT HAVE ADDITIONAL SOURCES OF INCOMES, % OF ALL PENSIONERS Have additional incomes Do not have additional incomes N

TYPES OF ADDITIONAL INCOMES IN RETIREMENT, % OF ALL PENSIONERS Work Help Financial tools 1121 Self-provision Real estate 0001 Other 1203 No additional income Difficult to say 2511 N Over 100% because this question allowed multiple choice answers

KNOWLEDGE ON THE STATE PROGRAM OF CO-FINANCING THE RETIREMENT SAVINGS

THE MAJORITY OF PEOPLE OF WORKING AGE KNOW THAT THEY CAN VOLUNTARY CONTRIBUTE TO THEIR PENSIONS BY ALLOCATING MONEY TO PRIVATE PENSION FUNDS BUT VERY FEW DO THAT Yes, I do it88 Yes, I would like to do it1612 No, I might wish to do it but I know very little about it 2518 No, I do not5062 N Do you allocate (or plan to do it) money to a private pension fund in order to get a supplementary pension in retirement? % of those who know about this possibility Do you know that you can voluntary contribute to your pension by allocating money to a private pension fund in order to get a supplementary pension in retirement? % working age people, N= 1098, 2010

Do not trust private pension funds5860 No nothing about private pension funds 65 Do not have enough information how to choose a pension fund properly 33 Do not have spare cash for it 3137 Do not know for sure my spending and earnings in future 1311 Other 57 Difficult to say 20 N Why do not you want to contribute money to a private pension fund to get a supplementary pension? % of those who do not want to deal with private pension funds, multiple choice with not mоre than 2 answers LACK OF TRUST RATHER THAN LACK OF MONEY OR INFORMATION MAKE PEOPLE REFUSE FROM USING PRIVATE PENSION FUNDS

AWARENESS OF THE STATE PROGRAM OF CO-FINANCING THE RETIREMENT SAVINGS AND WILLINGNESS TO PARTICIPATE IN IT

THE MAJORITY OF PEOPLE KNOW ABOUT THE STATE PROGRAM OF CO- FINANCING THE RETIREMENT SAVINGS BUT ONLY 27% CAN SAY THAT THEY KNOW IT WELL Starting in 2009 it is possible to get a 100% supplement to your voluntary contributions to supplementary pensions if you contribute from 2000 up to rubles. Do you know about it? %, N=1098,

21 What is your attitude towards this program? %, N=1223, 2010 EVERY SECOND OF THOSE WHO ARE ELIGIBLE FOR THIS PROGRAM APPRECIATE IT HIGHLY

22 Are you going to take part in this program? %, N=1223, 2010 NEVERTHELESS ONLY 22% ARE READY TO TAKE PART IN THIS PROGRAM

23 THE DYNAMICS OF ATTITUDES TOWARDS THE PROGRAM AND WILLINGNESS TO PARTICIPATE – THE DECREASE OF OPTIMISM IN 2010, % AttitudesWillingnessAttitudesWillingness Positive/yes Rather positive/ rather yes Rather negative/ rather no Negative/ no Difficult to say N Balance of positive estimations over negative ones, points

24 VERY FEW REPORT THAT THEY HAVE STRATEGIC GOALS AND EVEN LESS - STRATEGIES TO ACHIEVE THESE GOALS %, N=1600, 2010

25 DISCUSSION It seems that in the life-long perspective Russians do not smooth consumption as the Life-Cycle Model (Modigliani) predicts. Why do Russians prefer work after retirement and not savings? The idea of rationality is conceptualized not as a given inborn property of individuals but rather as a competence acquired through socialization in the presence of the particular type of social institutions: based on personal or impersonal trust. The lack of impersonal trust in financial institutions makes long- term financial savings for retirement impossible. That is why in life-cycle terms pensioners may compensate the loss of incomes by continuing to work after retirement or through sharing incomes in an extended family. Income smoothing rather than consumption smoothing. Could it be generalised to other institutional frameworks?