Pension Fund or Non-State Pension Fund: what to choose?

Is it worth switching to a non-state pension fund when it comes to ways to ensure a decent old age? Of course, this issue is of priority importance for middle-aged people today. And a certain part of them have no illusions that the state will provide all possible assistance in solving this problem. Yes, in difficult, from an economic point of view, conditions, power structures declare social guarantees, but people still need to prepare the ground in advance so as not to experience need when they retire. But how to do that?

One of the solutions to the problem

In order to improve the well-being of elderly citizens, non-state pension funds (NPFs) were created. Of course, they did not appear yesterday, and many of us know about their existence.

At one time, there was even a large-scale advertising campaign, the purpose of which was to attract as much investment as possible into the above structures. People began knocking on the door of pensioners and inviting them to become participants in the new program. That’s when the question arose: “Is it worth moving to a non-state pension fund?” To understand, let’s first define what this legal entity is.

Concept

As you know, a pension savings account is opened for each person. We work, we receive a reward for this, part of which goes to the Pension Fund, which distributes the material asset, again, partially accumulating it for the funded part of the pension. This is how a person secures his old age through his own efforts.

NPF is a legal structure that is controlled most carefully by the state. Moreover, all deposits that fall into it are insured. Therefore, if it suddenly happens that NPFs disappear from the market, their monetary assets will automatically be transferred to the deposits of the state Pension Fund. However, the following should be taken into account: NPFs carry out competent investment of depositors’ funds in securities, state corporations, bank deposits, accounts with credit institutions, etc.

Naturally, the citizen becomes richer as a result of such investments.

Company rating

What features of a company do potential investors pay attention to most often? NPF “First National Pension Fund” receives mixed reviews for its place in the rating of NPFs in Russia.

The company under study is located approximately in 17-18th place. This is far from leadership. Therefore, some potential investors are skeptical about the organization.

It is difficult to name the exact location of the fund in the rating of NPFs in Russia. You can simply say that the organization is not among the top 10 leaders in the country. But in the 20-30s you can find it.

To be or not to be?

When considering whether to transfer to a non-state pension fund, it is important to understand the following: the amount of social benefits for people who will retire in the future consists of three parts. Basic (6%) - forms benefits for older citizens (men after 60 years and women after 55 years). Insurance (14%) – accumulates on the employee’s personal account, but over time it is “eaten up” by inflation. Cumulative (2%) - aimed at providing a high-quality material basis for the future pensioner. It is the last of the above parts of social benefits that is of primary importance. Naturally, a rate of 2% is clearly not enough for a person to feel financially confident when he goes on a well-deserved vacation. As for the NPF, its base rate is not 2%, but 6%. Of course, this detail clarifies the question of whether it is worth moving to a non-state pension fund. And yet, when deciding it, there are both pros and cons. Let's list the main ones.

Profitability

An important factor is such an indicator as profitability. Many potential investors pay attention to it. After all, for some it is not enough that their pension savings will be safe and sound. I would like to increase them a little more. And the more, the better.

The national non-state pension fund has a good profitability, according to statistics. It is about 13.21% per year. But clients say the opposite. Some investors note that NPF National is not suitable for increasing pensions. The real yield here is about 5-8%. Therefore, it is clearly not worth counting on a significant increase in savings.

Due to such discrepancies, the National Non-State Pension Fund receives mixed reviews from clients. Some say they are happy with the increase in future pensions, while others call the organization deceivers and scammers. In fact, the discrepancies between the actual situation and statistics are easily explained by inflation. We can only say with confidence that NPF National does not offer the highest return. But the organization does not deceive its clients. Pension savings are indeed increasing. Although not as fast as we would like.

pros

Some experts, when asked: “Is it worth moving to a non-state pension fund?”, confidently state: “Yes!” Why?

Firstly, the monthly payment amount will be made up not only of contributions from individuals, but also of the income portion, which is formed by assets obtained through investing the money supply. However, when deciding whether it is worth switching to a non-state pension fund and what benefits can be obtained from this, it is important to consider the following: in rare cases, the agreement fixes the amount of profit, so as to predict under what scenario the economy will develop on the world market, and what the profit will be The results of the game on the stock exchange are very difficult.

An important advantage of the old-age program under consideration is that it provides for the safety of invested assets: if some projects turn out to be unprofitable, then this will not decrease the amount of money in clients’ accounts, since the structure compensates for the damage from its own reserves.

Do you doubt whether you should switch to NFP? Perhaps you will be given confidence by the fact that if any change in the financial market occurs, the structure will not ignore this and will adjust the investment plan for the year, taking into account the emerging trends.

Minuses

However, there is also a share of experts who answer the question: “Is it necessary to transfer to a non-state pension fund?” without hesitation, answer in the negative. Why?

Firstly, if the financial year turns out to be unfavorable, then there can be no talk of any stability of income.

Secondly, if the above structure for some reason loses its license, then the prerogative to transfer funds to another NPF and finance this procedure falls on the shoulders of the investor. Yes, these disadvantages cannot be called significant, and yet they cause some discomfort, but there are still more advantages. Of course, everyone must decide on an individual basis whether they need to transfer to a non-state pension fund.

Pros and cons of the state pension fund

Considering the positive and negative aspects of the Pension Fund's activities, experts get off with a couple of sentences, talking about the advantages of the fund, and one about the disadvantages.

We quote them verbatim:

• The advantage of a state fund is its reliability - there is absolutely no risk of losing savings;
• regular indexation linked to inflation.

The disadvantages include the low profitability of funds stored in the Pension Fund.

If we talk about the advantages, they are stated precisely and even with a strong desire you will not find more. But you need to deal with the disadvantages.

1. When talking about low income, social service workers are either disingenuous or do not understand what they are talking about. After all, the level of profitability of funds set aside in the Pension Fund does not in any way affect the pension of the country’s residents. There is not a single word in the regulatory documents that links the size of pension payments to the profits of the Pension Fund, which circulates the population’s money through VEB.RF.

Profitability affects only the number of fund employees, their salaries and palace buildings. Judging by what is observed on the ground, everything is fine with making a profit: a huge staff, large salaries, buildings better than Gazprom’s.

2. In all developed countries, pension savings belong to the investor. He has the right to bequeath them or withdraw them completely at any time. The amounts there are considerable. For example, in the USA, a worker, not a white collar worker, but a hard worker, upon retirement has about 750.0-1500.0 thousand US dollars in his pension fund account, which allows him to travel around the world without worries or provide financially for his family after of death.

The difference in pension provision is clearly demonstrated by a curious case from US legal practice. The widow of a Navy colonel received a large pension for her husband, even by American standards. At the age of 80, she wanted to marry a 40-year-old illegal Ukrainian immigrant. The marriage was registered. After 5 years the woman dies. After legal proceedings, the United States government was forced to pay a pension for the deceased colonel to the widower.

Is this possible in Russia? Here, even direct heirs cannot receive the rest of the pension savings from the state fund. That's all the difference. This is a minus and a fat one at that.

3. Information about the activities of the fund is completely closed. Under no circumstances will it be possible to find out where and under what conditions the fund’s money is invested.

4. It is also impossible to obtain information about the state of a pensioner’s personal account. Information is provided only when funds are transferred to a non-state fund. There’s no need to even explain anything here. After all, knowing the amounts confirmed by an extract from the fund, the heirs can try to get the unpaid part of the pension savings through the court. And so - no paper, no business.

5. The fund’s huge staff does not correspond to the quality of service. It even seems that the more employees there are, the more difficult it is to achieve your goal.

6. The absence of a formal agreement between the fund and the client puts the latter in a powerless position.

The results of the analysis are impressive: the Pension Fund of Russia has practically no disadvantages.

Features of the procedure

For many, the question remains unclear: “Is the transition from the Pension Fund to the Non-State Pension Fund a right or an obligation?” Naturally, no one can force anyone to undergo this procedure, since it is voluntary. Moreover, you can write a corresponding application for transfer to a non-state structure at any time of the year; this is done once every 12 months. The document must necessarily indicate the legal entity where the funded part of the pension will be accumulated.

Is it worth switching to a non-state pension fund?

Every working citizen has the right to independently make a choice in favor of one of the non-state pension funds. At the same time, there are no articles in the legislation that force citizens to transfer savings to one of the many funds. Therefore, the transfer of pension funds to a non-state pension fund is a voluntary desire of a citizen.

Well, now let’s find out whether it’s worth transferring the funded part (hereinafter referred to as PF) to the NPF. Such non-state pension funds were formed to increase the pension savings of citizens. Consequently, such companies operate under the control of government agencies, and the insured person will not be able to lose savings when transferring NP.

It is recommended to transfer NP to NFP no more often than once every 5 years.

The main reason for the development of non-state pension funds is the low profitability of the Pension Fund (no more than 6%). At the same time, the inflation rate may exceed these indicators. As a result, the amount of savings depreciates every year.

When transferring NPs to NPFs, NPs contribute to more profitable areas. Thus, LF remains and increases annually. However, NPFs cannot guarantee a consistently high percentage of investment activities.

In addition, in most cases, NPFs are created by large companies such as Sberbank, Lukoil, Gazprom, and so on. Consequently, such companies have an excellent reputation and a high level of security.

Another important point is that if a non-state pension fund disappears from the market, then pension payments are automatically returned to the Pension Fund. As a result, citizens cannot lose their own NP.

Thus, transferring savings to a non-state pension fund is a profitable and safe event. This option is perfect for those who are thinking about future well-being and strive to preserve their income.

Procedure for carrying out the procedure

Don’t know how to transfer to a non-state pension fund? You need to do the following:

1. Determine the structure you trust most. Analyze reviews of people who have invested money in a particular NPF, check how many years it has been on the market, and read the company’s legal documentation.

2. Conclude an agreement providing for compulsory pension insurance and study its text in detail. The document must clearly state in what amount and with what frequency contributions must be made. Before signing the document, it would be a good idea to develop an individual pension plan with your employees, which will indicate approximate figures with the option of adjusting them, depending on the financial capabilities of the future pensioner. Flexible replenishment of savings is one of the beneficial conditions for the client.

3. Before December 31, address the territorial body of the Pension Fund of the Russian Federation with an application for transfer to a non-state pension fund.

4. Wait for written notification of the decision.

Now you have an idea of ​​how to transfer to a non-state pension fund.

Foundation statistics

All graphs and tables are based on data and reporting from the website of the Central Bank of the Russian Federation cbr.ru

In 2020, the fund ranked 16th among other funds in terms of income. By size of assets 13. By number of participants 11.

Profitability

Detailed statistics

Methods for submitting documentation

You can submit your application personally to a Pension Fund employee. Be sure to take your SNILS and passport with you. And do not forget to request the appropriate receipt when accepting documentation.

You can also send an application for transfer to a non-state pension fund through the MFC system.

It is not prohibited to address the above document by mail. In this case, you will have to use a registered letter with attachment and notification.

The envelope will need to be sealed with an application filled out on a special form, photocopies of SNILS and passport.