elderly russian women Vladimir Smirnov\TASS\Getty Images

Putin’s Botched Pension Reform

Russia’s crony-capitalist economic model requires an ever-increasing volume of funds to be burned on lavish mega-projects that generate huge profits for a dozen families close to the Kremlin. Now it seems to be pensioners’ turn to make the sacrifices needed to finance the appetites of Russia’s new aristocracy.

MOSCOW – Modern Russia has never had a proper pension system. It inherited from the Soviet Union both very low retirement ages – 55 for women and 60 for men – and paltry resources to fund state pensions. But the recent decision of President Vladimir Putin and the Duma (parliament) to raise the retirement age will not fix the problem – and may create more serious problems than it solves.

Since 1991, at least six different pension reforms have been implemented, with each contradicting the one that preceded it. And when the government tried to facilitate the emergence of private pension funds, the new vehicles soon went bankrupt, owing to massive fraud. All told, the various reforms have had few discernible results.

Raising the retirement age – to 60 for women and 65 for men – seems like a simple way to help close the financing shortfall. But it has proven to be spectacularly unpopular, with Putin’s approval rating plummeting at least a dozen percentage points since the spring, to a level not seen since before the 2014 annexation of Crimea.