Putin Dials Back Pension Plan After Backlash

Ann M. Simmons

The Wall Street Journal

Biography
ann.simmons@wsj.com

Updated Aug. 29, 2018 7:39 a.m. ET

A woman holding a poster that reads ‘Want to retire, it's time to change the authority!’ at a rally in Moscow last month against raising the retirement age. Photo: Associated Press

MOSCOW—Russian President Vladimir Putin softened a plan to raise pension ages to bolster state finances, a rare backtrack following a public outcry that cut his approval ratings to the lowest level in more than four years.

In a televised address Wednesday, Mr. Putin proposed that the pension age for women be increased from 55 to 60 instead of the 63 years proposed by parliament. He didn’t propose reducing the retirement age for men, which would still increase from 60 to 65.

Mr. Putin’s intervention over the plan underscores a central challenge he faces after 18 years in power: Russia’s economy is facing years of slow growth without the kind of overhauls that could undermine Mr. Putin’s bargain with citizens to provide relative economic well-being while limiting political freedoms.

Mr. Putin said the main aim of the bill was to ensure the financial stability of the pension system for many years.

“The conclusion is clear, the able-bodied population is being reduced and as such the opportunities for paying and indexing pensions are automatically reduced. So, changes are necessary,” Mr. Putin said.

The overhaul, raising the general age at which people qualify for state old-age pensions for the first time since the early 1930s, comes as Russia’s economy is smarting from international sanctions and a depreciated ruble has left average Russians with less spending power. Fierce opposition to the change is undermining the notion of Mr. Putin’s political invincibility.

President Vladimir Putin chairing a government meeting on social and economic issues, including the pension system, in the Siberian city of Omsk on Tuesday. Photo: Alexei Druzhinin/Kremlin/Reuters

Thousands of citizens protested the proposed legislation at rallies across the country in June, including in some traditionally pro-Putin strongholds in the heartlands. Opponents of the law say it would erode the state social-safety net, which has been a feature of Russian life from the communist era onward and remains a crucial lifeline for Russians.

Russia’s State Duma, the lower house of parliament, voted overwhelmingly in favor of the overhaul last month in the first of three readings of the proposed legislation, which must be approved by the upper house before being signed into law by the president.

The Kremlin has sought to distance itself from the unpopular law, stressing the role of Prime Minister Dmitry Medvedev’s government in drafting the bill. But Russians know that no policy change happens without Mr. Putin’s blessing.

“It is the first time that people have understood that Putin is responsible for something, for something bad in this case,” said Andrei Kolesnikov of the Carnegie Moscow Center. “Because of that his approval ratings, his trust ratings, have been falling.”

The president’s popularity has eroded from a high of 89% in June 2015 to 67% in July, according to Levada-Center, a Moscow-based independent polling organization.

Mr. Putin had previously said he didn’t like the proposed options for raising the retirement age but has deemed the overhaul essential as Russia’s fast-aging population and shrinking workforce create a growing financial burden on the economy.

People applauding during a protest against raising the retirement age and reforming the pension system in Moscow last month. Photo: Alexander Zemlianichenko/Associated Press

Today, there is one Russian pensioner for every 2.3 persons of working age, according to the Higher School of Economics in Moscow. In 1959, there were five working-age people per pension; that number had dropped to three by 2007 and is expected to fall further to two working-age people per pensioner by 2023.

On Tuesday, Mr. Putin acknowledged the “sharp” reaction to the proposed retirement-age adjustment, telling a government meeting in the Siberian city of Omsk that any pension changes should be fair, ensure decent living standards, and protect current and future generations of Russian citizens.

Data from Russia’s pension fund shows that last year 43.5 million people received a state pension, which in 2017 cost the equivalent of around $106.2 billion. This year, the government transferred $35.7 billion from the federal budget to cover the shortfall in pension payments, according to State Duma statistics.

Working Longer

Russia’s proposal to raise pension ages, which would be phased in over 16 years, leaves people with fewer retirement years before reaching present-day life-expectancy levels.

Current retirement age

Russia’s proposed retirement age

Life expectancy*

aGE

Men

Retirement

years

Russia

U.S.†

Women

Russia

U.S.†

*Life expectancy at birth for those born 2015-20 †Age to receive full Social Security benefits for people born after 1960

Sources: OECD (life expectancy); Social Security Administration (U.S. retirement age); government of Russia (Russia retirement ages)

“If you keep today’s pension age…the ratio between pensioners and those who work and make pension contributions will worsen,” said Yury Mikhailovich Gorlin, deputy head of the government’s Institute of Social Analysis and Forecasting in Moscow. Doing nothing, he added, would make it increasingly difficult for the government to keep pensions in line with inflation, even if Russia’s economy were to grow faster than it is now.

Analysts said the popular backlash to the proposed pension changes was predictable.

Many people view the move to delay their retirement as “a violation of Russia’s unwritten social contract,” said Mr. Kolesnikov of the Carnegie Center. In exchange for maintaining order and politically supporting the government, Russian citizens expect a level of social benefits, Mr. Kolesnikov said.

“In the understanding of the population there is a division—what the state should take care of and what citizens themselves should take care of,” said Andrei Milekhin, president of Romir, an independent research center in Moscow. “People don’t mind that the government is looking for funds to improve macroeconomic indicators; the main thing is that this doesn’t interfere with citizens at their micro level.”

Opposition to the changes has united such unlikely allies as Communist Party supporters and backers of anticorruption activist Alexei Navalny, Mr. Putin’s main political nemesis. Mr. Navalny was arrested on Saturday and ordered held for 30 days ahead on a nationwide rally he was planning to lead on Sept. 9 to protest the pension legislation. Authorities said his jailing was related to his organization of an illegal rally in January, according to local media reports.

—James Marson and Nonna Fomenko contributed to this article.

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