Pension Fund Misses Notification Deadline

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Pension Fund Misses Notification Deadline

Vedomosti, August 18, 2003

Pension Fund head Mikhail Zurabov

Gearing up for the transition to an investment-based pension system, the Pension Fund promised to send account status notifications to all future pensioners by Aug. 1. Not only did it miss the deadline, but it will not be ready even by Oct. 1.

As a result, management companies and government officials have said the fund should give people at least an extra month to pick a manager for their pensions.

Under a June government decree, the Pension Fund was supposed to send out the letters to all "investors" by Aug. 1, but according to a press release from the fund last week, only 1.7 million of the estimated 40 million letters have been delivered so far. The fund has printed 5.4 million notices and given 4.3 million of them to the post office.

The fund said its printing center, which was set up to send the letters, will work around the clock to put out 600,000 notices per day. Even so, by Oct. 1, the center would only have 33.6 million letters ready.

In addition to information about the balance of the pension account as of Jan. 1, 2003, the letters contain a form for selecting a pension management company. According to the letters, those who wish to use a private management company rather than the government's default manager, Vneshekonombank, must reply to the Pension Fund by Oct. 15.

"If the Pension Fund really cannot send out all the notices by late September, we must extend the application deadline, otherwise future pensioners' right will be seriously violated," First Deputy Economic Development and Trade Minister Mikhail Dmitriyev said.

Yevgeny Gontmakher, head of the government's administration department, agreed that the deadline for applications should be moved to Nov. 15, but he noted that it is up to the fund, not to the government, to do so.

Pushing back the deadline should not delay the transfer of funds to management companies, which has been set for Jan. 1, 2004, Gontmakher said.

"It is strange that the Pension Fund has not informed the public about its difficulties," said Alexei Shkrapkin, director general of management company Kapital. "Until now [Pension Fund head] Mikhail Zurabov had been promising to meet the set deadline."

"The scope and the timeline of this work were known well in advance," said Polina Kryuchkova, an expert with the Confederation of Consumer Societies. "Did the Pension Fund not know its own printing center's capabilities until now?"

Management company representatives believe the application deadline should be extended.

"At least one month from the time the last letter is received should be given for selecting a management company," said Yelena Kasyanova, head of the fiduciary transactions department at Bank of Moscow. "Otherwise, the ongoing tender for management companies makes very little sense."

Even so, the proposed extension may not be enough.

"Processing applications is technologically a much more difficult process than mailing notices, so the fund will probably run into the same to work overtime to meet the deadline," Shkrapkin said.