RIGHTS-RUSSIA: Getting Old and Poor

By IPS Correspondents Reprint | | Print |

Sergei Blagov

MOSCOW, Oct 3 1999 (IPS) - Old age is often called life’s parody, but these days Russia’s pension system looks like a mockery of safe retirement. The country’s 38.5 million retired workers have been among the hardest hit by the country’s chaotic post-Soviet economic and social regression.

Used to the Soviet system of fixed prices and a wide social protection net, they first lost they life savings almost overnight, when hyperinflation wiped out deposits in the state-run savings bank in late 1991. The situation only worsened in August 1998, when the country suffered a financial meltdown.

Tatyana Alexeyevna, 68, is supposed to live on a pension of 450 rubles (18 US dollars) a month. After paying eight dollars for rent and health care, she is left with ten dollars. Not much in Moscow, where food prices are not much lower than other European countries.

No big wonder that Tatyana Alexeyevna, 13 years into her pension age, continues working at a textile mill, earning between 500 and 1,000 rubles (20-40 dollar) a month.

Over the years, it has become normal that pensions are paid two or three months late in many Russian regions.

The regional administrations’ bad reputation has opened opportunities for gangs to take advantage: in one particular incident in Omsk (central Siberia), a group of postmen was caught stealing the paycheques of elderly people living in remote villages, who thought they were victims of yet another bureaucratic delay.

“It’s a shame. It’s impossible to live on such pensions,” complains Valentina Sarkisova. She is one of the some 12,000 pensioners in the Tambov region in central Russia, who get 304 rubles a month, the minimal retirement wage.

The “incompetence and arrogance of Russian bureaucrats” effectively deprive many elderly people from their basic rights, Andrei Babushkin, head of the Russian Committee of Civil Rights, told IPS.

“For instance, elderly people without residence registration are denied their pension, and as a result more than one million Russian pensioners do not receive any income at all,” he said.

Before the crisis started, the average pension in Russia was 30 percent above the official subsistence level, while now it is one third below. On top, Russian elders have less job opportunities, because age discrimination is also common in this country.

While prices have doubled and in some cases tripled since August 1998, the average pension has remained almost intact. Trying to contain social spending, the governments resorts to unorthodox schemes: this year, roughly one tenth of arrears were paid with proceeds from the sale of U.S. and European food aid.

“Elderly people face countless new problems due to the difficult economic situation in Russia,” said Alexander Ovanesov, deputy representative of the United Nations Development Programme (UNDP) in Russia.

However, “it is ridiculous and unrealistic to expect that these problems could be tackled by the international community – this is a responsibility of national governments, while international bodies can only provide technical assistance,” he said.

UNDP grants assistance to a number of projects in Russia, including gerontological centres in Voronezh and Ulyanovsk.

Nonetheless, there have been some rare good news for pensioners. The Russian government has decided to raise pensions by 15 percent as of 1 November Valentina Matvienko, deputy prime minister in charge of social issues announced, raising the minimal pension from 304 to 365 rubles.

The government explains its conservative approach to raising pensions by the fact that social benefits are now by law linked to the average wage, which is low. Over the last quarter of 1999 an average pension will grow from 474 up to 545 rubles (from 19 to 22 dollar), Mikhail Zurabov, chairman of Russia’s Pension Fund said.

The state-run Pension Fund is financed by active workers, a system being questioned in most countries, due to the growing financial burden of an ageing population. Employers contribute 28 percent of the salary, while employees add one percent.

Conceding that pension levels are miserably low, Zurabov argues that the pension system is not responsible for the country’s financial woes. “If we have an average salary of 1,619 rubles (some 65 dollars), how could we achieve higher pensions? Low wages directly affect the pension system,” he says.

Every recent Russian government has come to power promising to end arrears on pensions – invariably built up under the previous cabinet – but the real buying power of pensions keeps diminishing.

Prime minister Vladimir Putin announced earlier in September that the government had cleared all pension arrears. According to official statistics, since the beginning of 1999 some 26 billion rubles (more than one billion dollars) had been paid.

However, he conceded that just clearing debts is not enough when an average pension can not guarantee minimal subsistence needs. The government aims at substantially raising pensions, Putin promised.

Furthermore, president Boris Yeltsin has ordered to pay extra 50 rubles to every pensioner in October. Zurabov has said his Pension Fund amassed 2.15 billion rubles (860 million dollars) for the purpose. However, it is far from certain if 2 more dollars per month will make a big difference.

Analysts say that pension arrears are certain to become again an instrument for political manoeuvrings, as parliamentary elections are scheduled for December. For instance, the incumbent governor of Sverdlovsk, Eduard Rossel, won a convincing majority of votes earlier this year, after clearing all pension arrears in the region.

Analysts argue that some Russia’s 38.5 million pensioners represent a decisive electoral force and a scheme to attract their votes is the main reason behind the government’s move to raise pensions.

The Russian pension system is not immune to the country’s political turmoil and security concerns.

The federal Government stopped funds transfers to the breakaway region of Chechnya since mid-September, deputy prime minister Matviyenko said, as the authorities suspect that the money could be channelled to support Islamic militants fighting against Russian troops in the border with Dagestan.

The humble hopes of millions of retired people for a dignified life are now further threatened by the seemingly escalating war in the Caucasus region. Facing the need to finance a large-scale military operation, the Russian government could – once again – hold their pensions.

But analysts argue that such twist could have barely predictable repercussions for upcoming crucial elections – for Parliament in December and for Presidential in June 2000.