Belarus needs pension reform; yet raising retirement age won’t reduce strains on social security

On 25 March 2016, president Lukashenka confirmed his support for the gradual 3-year increase of the retirement age, currently at 55 years for women and 60 years for men.

The government had been discussing the pension reform in the previous years, but the president dismissed it as “untimely.” Now, with the presidential elections in the past, Lukashenka is determined to proceed with the unpopular measures.

Surprisingly, along with the reactions from the Belarusians, the Russian ambassador to Belarus, Aleksandr Surikov felt the need to make a statement on the Belarusian pension reform. On 31 March, he hinted that people might start looking for jobs and better retirement options elsewhere. Obviously, he implied migration to Russia, which along with Belarus, currently is leading the list of countries with the lowest retirement age.

By contrast, global trends reveal that the retirement age in most countries of the world lies between 60 and 65 years. Demographic challenges might move it even beyond 65 years, as the debates in the U.S., France, and Spain indicate.

Scenarios of the pension reform

Currently, rapid ageing places the Belarusian economy under pressure. The ratio of retired people to the working population already lies at 61 to 100. Increasing the retirement age appears to be the easiest solution in this situation. Alternatively, the state could lower already negligible pension payments or reform the entire social security system. Finally, Belarus could open up for migration, but this solution is even less likely to appeal to the government and the population.

In 2016, the Belarusian government hurried to draft the pension reform, to take effect in January 2017. Three basic scenarios emerged. In the first, the Minister of Social Security, Mariana Shchotkina supported the 5 year increase of the retirement age. She argued that it would be the most practical and economically logical decision.

The second, “demographic” or “gender” scenario, reflected the existing gap in the male and female life expectancy. According to Belstat, women live longer than men by 11 years on the average. Assuming that a retired person receives pension for approximately 20 years, the government suggested to increase the retirement age for 5 and 3 years for women and men respectively.

Eventually, president Lukashenka chose the mildest and the most reluctant among the three scenarios. It suggests raising current retirement age by 3 years. With the gradual increase by 6 months over the next 6 years, women would retire at 58 and men at 63.

Independent experts criticised all three options, pointing out that in the long run they still would again put pressures on the social security system. Realistically, Belarus should plan to increase the retirement age to 65 years, both for women and men. This would be in line with the recent global trends towards gender equality in the right to retire.

On 25 March 2016, Lukashenka expressed his gratitude to the youth and seniors for their alleged support of the pension reform. However, a survey conducted by IISEPS in December 2015, show that 73 per cent of respondents spoke against raising the retirement age. The main argument is that many people would not be able to live that long. Another 20 per cent agreed to the increase of the retirement age, yet connected this step to the increase of the pension payments as well.

Employed pensioners?

Source: finance.tut.by

Many people in Belarus continue working after they reach the retirement age. However, one of the paradoxes is that they receive the regular salary along with the pension payments. As of 1 January 2016, out of a total of 2,592,800 pensioners in Belarus, 651,000 retired people continued working. In other words, every fourth pensioner received double income.

Former employees of the military and law enforcement institutions, who retire early upon reaching the age of 45 or 50, often use this possibility to make extra money. Tut.by cites a typical example of this trend: a 48-year old former police officer with a pension of about $320 (on par with an average salary in the country) is seeking a job with salary expectations of about $400.

State bureaucracy also benefits from this scheme. For instance, the head of the Central Electoral Commission, Lidzia Yarmoshyna admitted in the media that that she received an average pension of about $160 USD in addition to her regular salary, exceeding $800. While for a state official such a pension might appear as an additional pleasant bonus, for other categories of retired Belarusians it remains the main source of income.

Social benefits and integration of seniors

Recently, several stories of ordinary Belarusian seniors went viral online, bringing to light a number of issues that pensioners face in their everyday life. These range from economic difficulties to problems of social integration. In February 2016, Belarusian Facebook users organised a support campaign for a 74-year old man, who sold handmade bird’s houses in a pedestrian underpass in the centre of Minsk.

Another story featured a 86-year old woman on crutches who is selling handmade mittens and socks at the Niamiha subway station in Minsk, despite the cold and humid March weather. However, seniors are humble and refuse to complain of financial difficulties. Rather, they emphasise the need to pursue hobbies, keep active, and socialise.

At the same time, the state strives to provide the basic necessary levels of social support for the pensioners. For instance, seniors who do not have close relatives, qualify for social services free of charge. These include visits of the social worker, who assists the pensioners with regular medications and grocery shopping, everyday chores, and, if applicable, basic gardening on the private plot.

In 2012, the government introduced the system of targeted support for the most vulnerable population groups. These include including retired people over 70 years old with low incomes. They qualify for the additional monthly social benefits or special one-time payments.

Pension reform in Belarus is necessary and long overdue. Yet raising the retirement age alone will not eliminate all strains on the social security system. In the long run, the state should diversify its strategies and develop funded pension plans, as it has been done in Poland or Latvia. However, this option will be viable only in the conditions of a stable economy, thus requiring genuine commitment to structural reforms.

Originally published at BelarusDigest