Belarusian government will raise retirement age and will preserve monopoly in pension sphere

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April 22, 2016 19:43

President Lukashenka is preparing public opinion for significant cuts in state’s pension obligations. The decision to reduce social protection with regard to pensions was likely made before the start of the presidential campaign. The authorities have planned substantial cuts in social protection for the near future due to languishing budget revenues. 

Last week, the president discussed raising the retirement age with the government.

The state has long been preparing the population for the introduction of unpopular measures to increase the retirement age. For example, this issue has been voiced yet before the start of the 2015 presidential campaign, which suggests it was seriously considered. "My opinion on this matter is well known: if people do not want the retirement age to be raised, we tell them straight away - this is the retirement age, here is the pension fund, we divide it among all pensioners", the president then said. Most likely, the president was probing the approval of pension restrictions by his traditional electorate.

After all, this measure will affect primarily women, for whom the alignment of the retirement age with men’s will be a significant increase. The president proposed to make the retirement age the same for men and women: "Everything should be taken into account: the difference in life expectancy between men and women, the specifics of rural and urban areas, the working conditions and other factors”.

That said, the difference in life expectancy between men and women is still high in Belarus, albeit declining. For example, current gender-based mortality varies by 10-11 years, while before it was higher - 11-12 years.

Interestingly, Lukashenka’s campaigning team in the most recent elections consisted mainly of women. Among Lukashenka’s supporters, women prevailed in 2015 - 83/17.

Notably, the government has introduced some pension age limits in early 2016, but it was relatively unnoticed by the Belarusian society.

The president also proposed to align the retirement age for all groups of the population, including the security forces, "... representatives of the law enforcement, today, in principle, may retire at 45 years old. 90-something per cent may retire at 45. What kind of a pensioner is at 45?! I think it would be fair, if the issue of raising the retirement age affects everyone”.

However, despite the crisis of the current pension model, the government has no plans to change the system itself. It remains a common one, rather than funded, which is likely due to the government’s desire to demonstrate its care for the people and prevent people from assuming a responsibility for their retirement savings.

In addition, as requested by the president a while ago, the state will cut its social benefits for the population gradually, over a long time.

Overall, the retirement age is likely to be raised gradually over several years, in order to popularize the idea among Lukashenka’s electorate.

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The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.

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