(Bloomberg) -- Russian President Vladimir Putin broke weeks of silence over the government's plan to revamp the pension system, saying no final decision has been made but warning of a growing strain on public finances.
Speaking a day after lawmakers approved a draft proposal in the first reading to raise the retirement age, Putin said that he likes none of the options presented so far. While conceding the issue is “very sensitive,” he signaled Russia may be running out of time to find a fix. Pensions will probably have to remain low if no changes are made, he said.
“The moment will come relatively soon when the number of workers will equal the number of retirees and will then continue to decline,” Putin said Friday in televised remarks from Kaliningrad. “And then either the pension system will burst or the budget of the reserve fund used to finance the deficit in the pension system will blow up.”
Under the proposal made in June, the retirement age will rise gradually starting next year, reaching 65 for men by 2028 and 63 for women by 2034. The plan has rankled Russians because life expectancy remains so low that it would allow for too few years of retirement. Meanwhile, poor job prospects could leave many older people unemployed.
The public backlash that followed has already spilled into protests and a steep drop in Putin's poll ratings.
While Russia has enough money to maintain pension payouts for up to 10 years, it has to start thinking about the future, according to Putin. “Real assessments of the state of the economy and the social sphere” will have to be the basis of any decision, he said.
As for the options presented so far to raise the retirement age, “I don't like any of them,” Putin said, adding that he wants to hear “all opinions, all points of view.”
S&P Global Ratings, which on Friday maintained Russia's credit score at one step above junk, said “effective measures to address long-term fiscal pressures from an aging population” could put upward pressure on its sovereign ranking.
“Negative demographic trends and low productivity continue to weigh on Russia's long-term growth potential,” S&P said in a statement. “The new policy agenda includes challenging and unpopular reforms” -- such as increasing the pension age -- and these measures “could be instrumental in stimulating higher growth.”
To contact the reporter on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net
To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Paul Abelsky, Scott Rose
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