Analysis of pension budgets in different CIS countries revealed interesting facts. The countries where pension fund's incomes are diversified have no problems with financing of pensions and pay very high pensions compared to other cash incomes. For instance, judging by the ratio between average pensions and average wages, the best indices among the CIS countries can be observed in Belarus - 44.1% and Ukraine - 40%. These countries use pension income sources not-typical for Azerbaijan. In Azerbaijan average pension compared to average monthly wages made up 34.1% by the beginning of September, in Russia - 25.6%, in Georgia and Armenia - 16.7% and 18.1% respectively.
After the collapse of the Soviet Union all above-listed countries faced pension payment problem and each of them is treating the problem in its own way, even if undertaking temporary measures.
Azerbaijan
The budget of the Azerbaijani State Social Protection Fund (ASPF), which is immediately responsible for pension payments, has three key income sources. The major part of its budget incomes is formed through the obligatory social security assignments. Traditionally these incomes comprise or even exceed 70%. In 2007, in accordance with the amendments on the budget of the ASPF, this sort of incomes shall make up 71.8% or AZN 709.7mln. Assignments of private enterprises and organizations will amount to AZN 393.7mln (55.5%), State-run enterprises - AZN 316mln (44.5%). The assignment rate on obligatory social insurance was 25% during recent 3 years - 22% - assignments allocated by employers from their wage-funds, 3% - charges from employees' wages.
Another profound income source of the ASPF is the transfers from the public budget. They shall comprise AZN 278.7mln in 2007, which is 28.2% of the Fund's budget incomes. After labour pensions were separated from social pensions (they were intended for social maintenance of social pensioners) in 2006, the public budget's obligations in this field decreased. For instance, in 2006 the specific weight of transfers in the ASPF's budget incomes was 29.4%, though in 2005 it was 36.9%.
The third income source of the Fund is the revenues received from the cost of sanatoria and health tickets, which usually comprise 0.1% of the Fund's incomes.
Belarus
In compliance with the legislation the incomes of the Belarusian Social Protection Fund shall be formed through:
- obligatory insurance payments,
- assignments from the public budget,
- voluntary donations (including cash donations) by juridical entities and ordinary people,
- revenues from capitalization of the Fund's incomes,
- employers' funds intended for paying of pensions in compliance with item B of Article 1 of the 12th Law on Pensions of the Republic of Belarus. Juridical entities and physical bodies - the employers - responsible for damage caused to their employees pay fines.
- funds received from levying arrears, default interests, other financial sanctions and administrative fines,
- other incomes.
The retirement age in Belarus is one of the lowest ones as compared to other countries: 55 years for women and 60 for men. However, if a person continues working and does not receive pension through he/she is in his/her retirement age, then for each 2 months of his/her work 1% of his/her working experience is added to his/her further pension. So, if one rejects his/her pension for a year his/her pension rises by 6%.
Real amount of pensions in Belarus rose by 11.5% by September 2007 compared to September 2006. Pensions are expected to double by 2010 (at least 1.5 times in real terms).
Ukraine
In Ukraine, besides direct collection of obligatory insurance payments, there is a system of additional collection intended for paying of pensions, and it plays a very significant role. In 2007, the collection covered:
1) purchase and sale of non-cash currency,
2) trade it gold and platinum ware (except wedding rings), gems,
3) car alienation,
4) purchase and sale of real estate,
5) cellular network services.
In 2006, the additional collection made up 4.862bln hryvnias (some USD 963mln in the rate of the Ukrainian National Bank).
In 2006, the largest specific weight in the total of additional collection was of:
- purchase and sale of currencies - 50.3%,
- car alienation - 20.3%,
- cellular network services - 19.4%.
The system of additional collection intended for pension payment was established in Ukraine at the end of 90s, when the Pension Fun was experiencing an acute deficiency problem and therefore the funds in the public budget were used for payment of pensions. The sources of the collection and the rates were changed.
Obviously, it cannot be denied that launching of additional collection had a positive effect. But the collection was introduced as a temporary measure. But, there is nothing more permanent then that of temporary. Both many specialists and businessmen consider it necessary to reject the measure. And that seems sound, because in the last analysis the collection will result in a rise in prices and tariffs, for the collections also involve a large number of the pensioners.
Russia
The budget of the Pension Fund of Russia (PFR) is formed from three key sources. The first source is the payments paid by the employers for each worker, but these payments form the insurance part of the pension and for youth - accumulated part of the pension. The second source is the single social tax which goes to the formation of the base part of the pension which does not depend on length of service of the workers and is paid to those who have at least five years length of service. The third source is the direct subsidies of the federal budget which is growing each year.
Having three sources of incomes as Azerbaijan, Russia incurs problems with pension payments. PFR can not provide its citizens with necessary pensions despite the currently level of transfers and assistance of the federal budget. Over the recent 15 years, the ratio of the working Russians to the number of pensioners has decreased by 1.5.
The problems with lack of finances for pensions are deepening through growing obligations of the government to increase the pensions. Thus, the indicators of the growth of the average labor pensions over the period of 2006-2009 equal at least 20%.
According to the project of PFR's 2008-2010 budget, more than half of the pension expenses for 2010 will be paid by the federal budget and the ratio of the average pensions to the salaries in 2010 will be a little more than 25%. The PFR Head does not hide that he considers increasing the pension part of the social tax as only way out.
However, it is impossible to ensure the necessary level of the pensions only through single social tax. The matter is that the transfers from the tax are directed not only towards paying pensions, but also ensuring accumulated fund. These finances are envisaged to form the accumulated part of the pension of the future pensioners and the Fund can not spend them on paying the current pensions.
As a result, next year the government needs to compensate the Pension Fund for the financial lack: some 53.3% of the 2007 budget of the Pension Fund of Russia has been formed at the expense of transfers from the budget. Thus, today the welfare the Russian pensioners depends on the financial sustainability of the State budget, which is the key donor of the Pension Fund. If the government begins incurring irregularity of revenues, the pensioners will be one of those who will firstly feel it.
Exactly for this reason, the officials do not support the idea of increasing the payments for the pensioners at the expense of the State budget. As a result, the share of the pension expenditures in Russia makes up 6% of the GDP - several times less than those in the European countries where according to the dada of the World Bank, some 7% or 15% of the GDP is spent on the pensions. However, future increasing of the pensions through the budget assistance jeopardizes the stability of overall pension system. According to the data by the Pension Fund, exactly in the period of 2010-2020, the Russian economy will incur peak of pension load.
Conclusions
As seen, transferring additional revenues to the budget of pension funds resolves problems with pension payment lack in Ukraine and Belarus and is an urgent issue for Russia. Diversifying the pension budget in Azerbaijan, which has not demographic problems, may be useful for increasing pension. According to the European Social Charter, ratified by Azerbaijan, the amount of the minimal pension should not be less than 40% of the average salary in the country. However, on the other hand, Azerbaijan has large growth potential due to existing sources of incomes to the State Social Protection Fund. It deals with withdrawal from the shadow of the unregistered workers, implementation of active works to involve the foreigners in the social insurance and improvement of resort services. The works are being carried in these three directions and already yield positive results. In case of unexpected failure in these measures, it will be possible to think of using other sources of incomes to ensure pensions.