Russian Government Plans Additional Pension Indexation Amid High Inflation
The Russian government is considering an additional indexation of pensions in 2025, alongside the already scheduled increase on January 1, 2025. This announcement was made by Sergei Chirkov, head of the Social Fund, during a recent address to the Federation Council. The current budget is based on a 7.3% inflation forecast, but if actual inflation exceeds this figure, the government will take immediate action to adjust pensions accordingly.
Currently, Russia's annual inflation rate stands at approximately 8.7%, surpassing the government's target of 4%. The Ministry of Economic Development had previously anticipated a reduction in inflation to 7.3% by the end of 2024. However, Central Bank experts project that consumer prices could rise by 8-8.5% over the same period. Chirkov emphasized that the government is prepared to implement additional pension payments retroactively from January 1 if inflation rates warrant it.
Georgy Ostapkovich, a market research director, noted that adjusting pensions based on inflation is a standard legislative practice. He explained that while the government initially budgets based on inflation estimates, adjustments can be made once official statistics are available. If inflation is lower than expected, pensions will still be indexed at the planned rate of 7.3%. Conversely, if inflation rises to around 9%, pensions will be adjusted accordingly, potentially resulting in an additional increase mid-year.
Despite concerns about budgetary burdens, experts believe the government has sufficient reserves to manage these adjustments without significant financial strain. Maxim Kolyadov, from Insurance broker AMsec24, suggested that the government may also consider increasing other social payments, such as unemployment benefits and financial assistance for families, in response to the broader impact of inflation on various population segments.
In total, over 42 million Russians are expected to receive pensions in 2025, with a budget allocation of approximately 11 trillion rubles for insurance payments and 825 billion rubles for state support. Chirkov confirmed that pensions for working pensioners will also be indexed under the same conditions as those for non-working pensioners, raising the average old-age insurance pension to 24,000 rubles.
President Vladimir Putin had previously indicated plans to resume pension increases for working Russians during the St. Petersburg International Economic Forum in June, citing improved financial conditions as a reason for the adjustments.
