Vladimir Alexeyev: "people will abandon government's pension guardianship"

It appears that things are still murky with pension reforms in Russia.

Previous draft, which was introduced by a head of the Department of Healthcare and Social Development Mikhail Zurabov last week, confused members of the cabinet. The draft was sent away for improvements. Yesterday, Prime-Minister Mikhail Fradkov unexpectedly declared that Russian residents over 37 will be entitled to participate in the process of formation of pension savings.

Managing Director of RosBank Vladimir Alexeyev helped our correspondent Mikhail Nemolov to better understand current situation with pension reform in the country.

-Vladimir Nikolaevich, in case the decision to start the formation of the pension savings will finally be made, how will it affect the pension reform?

-First of all, people's trust in government will obviously increase; this factor is of utmost importance to bring this significant project to life. Consequently, private managing companies will have more possibilities to come up with systems of optional retirement insurance along with non-governmental companies. Even though today there are only few people who chose such private managing companies, their number will definitely grow.

-Will savings of those over 37 play an important role in the formation of the new pension reform?
-In the nearest future, this money will not play an important role. In future however, this money will serve as the main guarantor of financial stability of Russian stock markets, which is incredibly important for all investors including foreign.

-The foreseeable yield of pension savings appears to be quite low. What mechanisms could turn these finances into a valuable supplement to peoples' pensions?

-Our stock market is one of the most profitable markets in the world. However, it lacks stability and predictability. The risks are high and this factor affects profit making. Pension money is capable of bringing this needed stability into the market in a relatively short period of time. Thus, market stabilization along with other positive factors will make it risk-free and highly profitable.

-What is the forecast of the managing company of RosBank regarding the increasing number of potential pensioners using private managing companies?

-If the government will be quick to publicize all aspects of the pension reform, thus giving people more time to really understand it, then, starting this year, I think, nearly two million people will abandon government's pension guardianship.

-How important is this market development for investments in our country?

-It is more than important; it is absolutely necessary. I hope that peoples' savings could one day be invested in mortgage business as well as in real estate.

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Author`s name Andrey Mikhailov