The Central Bank named pension funds with the lowest profitability

In Russia, the non-state pension market confidently maintains the high growth rates that it acquired twenty years ago. Last but not least, this dynamics is characterized by the direct participation in the activities of NPFs of the largest organizations from three main industries: banks, transport and fuel/energy.

Many representatives of this market, which ten years ago showed strong growth, are annually “absorbed” by more stable financial and non-profit organizations.

All this leads to an already familiar phenomenon - monopolization. For better or worse, in 2021 there are an order of magnitude fewer non-state pension funds left than there were 5-10 years ago, but this has not made the choice of citizens any easier, but has only significantly complicated it.

Within the framework of this article, the current rating of fifteen non-state pension funds in terms of reliability, savings and profitability for the 2018 financial year is subject to analysis.

What profitability statistics do they demonstrate? Can you rely on these ratings and choose its leaders for yourself? Are these indicators relevant for 2021?

You will find answers to these and other questions below.

TOP-15 NPF in terms of reliability

To begin with, it should be noted that in Russia there are two main organizations that are involved in compiling and constantly updating the reliability rating of non-state pension funds - this is the Expert RA agency and the National Rating Agency organization.

Distribution by place and assignment of certain reliability ratings is carried out on the basis of financial statements, which are submitted on a mandatory basis by all non-state pension funds to the Central Bank of the Russian Federation.

Therefore, despite the fact that these agencies are commercial organizations (which automatically causes mistrust among some citizens), it is quite possible to rely on them and trust their judgment.

But their ratings include only those organizations that independently entered into an agreement with them, so small funds that demonstrate local quality, but are not able to “compete” with more famous non-state pension funds, may not appear among the best companies.

Opinion "RA"

It is important to understand that all value judgments are based on open information, which is published in relevant sources, but becomes available only at the end of the year, and for the most part only opens at the beginning of the new year.

Therefore, all ratings for 2021 will be formed based on the results of 2021, since the indicators for 2021 have not yet received wide publicity and only a few were updated in 2019.

So, based on the latest data, the NPF reliability rating, according to RA, consists of 14 representatives and looks like this:

As can be seen from the presented list, only 5 organizations received the highest score “ruAAA”. Such a high rating of their activities means that they are characterized by the maximum level of creditworthiness/financial reliability/financial stability.

Separately, it is worth paying attention to the date of updating the rating, since only 5 funds out of 14 were verified based on indicators for 2021 and only two of them are in the top 5 according to RA.

NRA's opinion

They have a slightly different opinion, and out of the top 15, only four organizations had their rating updated and confirmed for 2018/2019.

It should be clarified that the organizations that are highlighted in red in the table have already ceased to exist independently, having joined other non-state pension funds along with all clients and the existing volume of savings.

The status “Withdrawn” in the column “Forecast of further activities” means that the NPF did not extend the agreement with NRA to continue compiling the rating with their participation. That is, reliability assessments for them (according to the NRA) at the moment may differ from those previously issued and confirmed.

For any citizen who has already become a participant in non-state pension provision or plans to obtain this status, it is extremely important to understand that the chosen organization will continue to exist in the future. And the reliability rating in many ways allows you to choose the most stable non-state pension fund with a high probability of further development.

results

table 2

The top three included NPF Soglasie, First Industrial Alliance and Volga-Capital. The funds were highly rated due to their consistently high level of returns over 7-year and 3-year horizons at the same time. It is interesting to note that NPF Soglasiya has one of the lowest standard deviations of returns (2.06%), which is usually typical for bond portfolios. The standard deviation indicators of fund returns are shown in the table detailing the management parameters.

If NPF Soglasie remains a leader for the second year in a row (NPF Rating 2016), then the other two funds received high scores mainly due to the high management results of the last two years. Both funds are quite small in terms of the number of persons insured.

In general, of the millionaires, only NPF Soglasie showed good management results. All other large funds took positions in the ranking in the second half. This may be due to the ongoing process of mergers and acquisitions. The quality of management is still on the back burner.

Of last year's leaders, only NPF Socium remained in the top ten funds. In addition, NPF Neftegarant remains in the top ten for two years in a row.

NPF Lukoil-Garant and NPF Future received a zero score this year , since the results of their management are worse than inflation for all periods of time considered.

Table 3 displays data on the return on investment of all funds in the period 2011 - 2021. In 2021, the profitability for the first half of the year is shown.

Table 3

Real profitability is the final result of management after subtracting inflation.

NPF profitability rating

In addition to stability when choosing a non-state pension fund, every citizen of the Russian Federation pays attention to the profitability indicators offered by the organization, since non-state pension provision “lures” clients precisely to the opportunity to increase their pension savings.

The current legislation of the Russian Federation establishes that each non-state pension fund must provide information about profitability in an open form, therefore all key information is indicated on the official websites of organizations.

These indicators are published by the Central Bank of the Russian Federation on a quarterly basis and everyone can familiarize themselves with them.

At the beginning of 2021, the report for the 3rd quarter of 2021 is relevant, in which it is noted that the weighted average profitability of non-state pension funds was reduced by almost half to 1.8% per annum, compared to similar indicators of 4.7% for the third quarter of 2021.

This has led to the fact that a significant number of organizations have not yet disclosed this information, simply keeping silent about their largely failed investment activities/policies.

Therefore, even at the time of writing this article (which is April 1, 2021), it is difficult to judge financial gains for 2018.

One way or another, you can focus on the following rating of NPF performance indicators according to the profitability criterion, which was compiled on the basis of disclosed reports (available on the Central Bank website) and information provided from the organizations themselves:

Personal Area

Before registering in your personal account (hereinafter referred to as “PA”), you need to fulfill a number of conditions, namely:

• availability of a valid OPS agreement;
• opening an account according to Pension rules;
• client consent to the processing of personal information.

To register in LC you need to take the following steps:

1. Click on the link https://lk.npfsb.ru/?register=yes.
2. In the window that appears, you need to specify such information, How:
   E-mail address;
3. Name Patronymic name;
4. passport details;
5. SNILS number;
6. contact number;
7. created password (entered twice);
8. security question and answer.
9. Confirm the entered information using the entered code from the picture.
10. Check the box to consent to the processing of personal data.
11. On the second page you need to indicate your last name.
12. Log in to your email box, which will contain a link to go to your personal account.
13. Complete registration and log in to your account.

It is important to know! What to choose - NPF or Pension Fund?

Access to the Personal Account may be denied in the following cases:

• Making pension payments upon reaching the appropriate age.
• Termination of the OPS agreement.
• Violation of confidentiality rules.

Each client of the fund can receive SMS newsletters about important news and promotions of NPFs. To do this, check the box on the “Client Profile” page.

If any questions arise, the client can contact the contact center by phone 88005550041.

Advice from a lawyer on choosing a non-state pension fund

Absolutely all experts in this area agree that no one should influence a citizen’s decision as to whether he should move from the Pension Fund of the Russian Federation or from one NPF to another.

Just a few years ago, gaps in legislation were often taken advantage of by, to put it mildly, “ungodly organizations,” which sent their agents door-to-door and deceived citizens into coming under their wing. Fortunately, recent changes in regulations have managed to stop most of the fraudulent schemes.

The choice should be based solely on the personal preference of each person, regardless of the type of work activity and the employing organization.

When choosing a non-state pension fund and looking for an answer to the question of who to trust to manage your pension savings, you should focus on several key factors:

• How old is the company? It's simple: the more a fund engages in this activity, the greater the level of reliability it demonstrates.
• What place does it take in the ratings and with what results? The methodology for assigning an “assessment” and assigning organizations to places involves checking many nuances of the activities of NPFs, making it possible not to miss important details.
• What kind of service is provided? Tightening legislation has led to an increase in the level of the bureaucratic component. Therefore, you should not neglect the presence of branches or representative offices in close proximity to your place of residence/work. The presence of a hotline, the ability to communicate with employees of the organization through electronic and paper correspondence are indicators of the openness of the fund.
• How many clients does the fund have? Millions of existing clients demonstrate not only the reliability of the chosen organization, but also a high level of trust among citizens, which is an extremely important criterion for a non-governmental organization.
• What are the profitability indicators? Possible dividends should not be the only determining factors, since a high percentage of profitability does not guarantee the reliability of the company and its further productive and prosperous activities.

As in any other issue, when choosing a non-state pension fund you need to find a “golden mean”.

Example.

You are 25 years old and you receive a salary equal to 21 thousand rubles. The contribution will be, for example, 1800 rubles per month. The annual yield at the end of 2021 is 9.4%, and tends to increase over time. This interest will be calculated on your savings.

In addition, you can increase your income through the social tax deduction. As a result, at 60 years after finishing your career, the amount of your pension will exceed 50 thousand rubles. If you are interested in whether you can count on such payments from the Pension Fund of Russia, which is better than the Russian Pension Fund or NPF, then read this article.

Why is NPF more profitable than Pension Fund?

The answer to this question lies in the essence of the activities of non-state pension funds and the state fund.

The Russian Pension Fund is an organization that pursues an extremely conservative policy of investing funds, putting stability rather than profitability at the forefront, especially after the pension reforms of past years.

And a non-state pension fund is, first of all, an active participant in the investment market, for which it is important to attract as many investors as possible, thereby increasing its commission income.

That is why in the Russian Federation, on the Internet and in the media, advertising campaigns of NPFs are always full of promises of significant dividends to everyone who grants the right to represent their interests in increasing the volume of pension savings.

But such profitability is guaranteed to lead to an increase in risks, since if the NPF chooses the wrong investment strategy, there is a high probability of this indicator decreasing, including to a negative state and the actual loss of the license to operate.

But it is important to understand that the activities of NPFs are closely monitored by the state and various rating agencies, and these non-profit organizations under no circumstances can reduce the amount of transferred savings.

That is, in the worst case scenario, clients can expect only the loss of possible benefits (dividends), but not a decrease in their own funds.

If we consider the activities of non-state pension funds in comparison with the Pension Fund, they have an almost identical structure, since the state pension fund is also engaged in indexing the funded part of the future pension (this is entrusted to Vnesheconombank), but in much smaller volumes.

Summarizing the above, we can highlight the following main advantages of NPFs over Pension Funds:

• The organization's interest in increasing savings and increasing profitability.
• Activities are strictly regulated by current legislation. For comparison, no other non-profit organizations are subject to more control than NPFs.
• An agreement is concluded between the fund and the client, which clearly delineates the rights and obligations of both parties.
• All funds deposited by the client are subject to mandatory insurance.
• Availability of a personal account where you can constantly monitor the activity of your own funds.
• The funded portion can be withdrawn in full upon retirement.
• In the event of the death of the investor before retirement, the funded part is subject to inheritance.

But unlike the stable investment policy of the Pension Fund, which does not strive to achieve a high level of profitability, but only adheres to the minimum threshold that allows it to cover inflation, the NPF conducts extremely aggressive investment activities with the risks already outlined above.

And as stated earlier, sometimes these risks come to fruition, as in 2021, where several organizations posted unprofitable financial performance.

NPF will be a good choice for those who are willing to take risks in the desire to increase their own savings, as well as for those who are ready to participate directly in this.

And the Pension Fund should be chosen because of its reliability and stability, which has been demonstrated for more than a decade.

How to receive the funded part of your pension

There are two ways to find out the amount of your pension savings. Firstly, this information is posted in your Personal Account, and secondly, you can order a paper statement.

To receive your savings upon reaching retirement age or in case of acquiring the right to pay a pension ahead of schedule, you come to a Sberbank branch or the central office of the fund located in Moscow (Shabolovka St., 31g), write an application and collect a package of documents, including your passport , SNILS, pension certificate, bank details where savings will be transferred, and a certificate from the Pension Fund, which indicates the insurance period allowing you to apply for payment).

It is possible to send documents and applications to the fund by postal operators, but it is necessary to authenticate the signatures of the owner of the person’s savings with a notary.

There are 3 types of pension savings payments:

• one-time (paid if the estimated funded pension does not exceed 5% of the insurance amount);
• urgent (paid monthly subject to registration for a period of 10 years);
• funded pension (monthly for life).

For the last two types, the NPF may adjust the payment amount taking into account the investment results and the funds transferred by you.

In their contract, clients have the right to designate who will receive their savings in the event of premature death. There is a special paragraph for this where legal successors are listed. If they are not indicated, then the legal successors will be the first-priority heirs (these are children, spouse and (or) parents), and in their absence - the second-priority heirs (grandparents, brothers, sisters, grandchildren). When specifying heirs in the contract, there is no need to draw up a will for pension savings.

How is the pension paid?

• The first payment is made within 30 days after receipt of the application and documents.
• Further payments are made monthly. If the amount of the monthly pension is lower than the minimum established by the fund, then the money will be transferred to the pensioner once a quarter or once every six months.
• Funds are transferred to an account with Sberbank or opened with another financial institution. The program participant receives a plastic card – a “pension book”.

What else can we offer you for your consideration? These are various TOP lists prepared by our specialists.

• Rating of non-state pension funds by volume of pension savings

You might also be interested in these articles:

• NPF rating for reliability 2016
• NPF rating by profitability

02/20/2019 Information about the authors | Category: Current | Pension funds | Sberbank