The long-term savings program is designed to change the situation and help people achieve any financial goals, including maintaining their financial habits at any age. It is also called Long-Term Incentive. It works as follows: by concluding a long-term savings agreement with a non-state pension fund, you technically open a savings account there, to which you can transfer personal funds. The state will also make an additional payment to this account, and you can also transfer your pension savings (funded pension) there. The fund organizes savings management and accrues potential return to you.
People with pension savings (funded pension) can transfer them from the state system to their personal long-term savings program. These funds have been formed in mandatory pension insurance (MPI) system from 2002 to 2013 from part of employers’ insurance premiums. "Such a transfer gives a person a number of advantages. Firstly, it protects pension savings from possible transformations of the MPI system. Secondly, it allows use these funds at any time in a special life situation, to pay for expensive medical care or in the event of the loss of a breadwinner. Thirdly, it gives the right to choose the payment period yourself, according to the terms of the agreement. For example, in SberNPF it is from five years and longer. Fourthly, it allows withdraw the entire amount at once after 15 years of participation, and at any age,” explains Alexander Zaretsky. According to the expert, if you leave your pension savings in the state MPI system, these options will be unavailable, and the money will be paid out according to the rules established by law.
All funds in the LTI account are invested. However, a person cannot lose their savings: the investment result is calculated annually, and it cannot be negative at the end of every five years. The Bank of Russia monitors this. “Our strategy is balanced; the bulk of the portfolio is made up of fixed-income instruments. We invest 12-13% in the stock market to outpace the yield on bonds and deposits. In the future, SberNPF plans to enrich the product with additional investment strategies,” says Alexander Zaretsky.
Security is fundamental. Personal investments of Russians in LTI and investment return on them fall into the guarantee system of the Deposit Insurance Agency. This is twice as much as a deposit.
Photo is from open sources.
