On the mechanism of indexation of pensions in the system of compulsory pension insurance

Abstract

Problems related to the mechanism of pension indexation in the framework of compulsory pension insurance are discussed in this paper. The analysis has allowed to identify major defects of this mechanism in accordance with current legislation [1], in particular: the procedure for determining the size of indexation and other key parameters of the insurance pension system is not transparent for its stakeholders (pensioners, employees and employers), the pension system is financially dependent on budget transfers and is not robust to external shocks. An indexation procedure has been proposed and this procedure is organically linked to the basic principles of the compulsory pension insurance system and a systematic approach to its planning. Such an approach ensures transparency and unambiguity of indexation procedures for pensions and other parameters related to the pension system. The developed procedure should ensure, in particular, a uniform and sustainable pensions growth in the long run in accordance with the target values, subject to the implementation of an appropriate set of measures to improve the insurance pension system.

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