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Belarus: New voluntary state-insured pension system for employees

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By Michael Brough and Olga Yaurova | October 28, 2021

On October 1, 2022, employees in Belarus will be able to opt into a pension system supported by tax incentives and employer social security contribution.

Employer Action Code: Act

Decree No. 367 “On voluntary insurance of additional funded pension” will create a new system of individual insured pension accounts for employees from October 1, 2022. Participation will be voluntary but supported by tax incentives and the partial diversion of employer social security contributions to the new accounts if employees contribute. The system will operate in parallel with existing voluntary insured retirement arrangements based on endowment policies to supplement social security benefits. Plans are offered by Stravita, a state-owned insurer holding about two-thirds of the market, and Priorlife, a private insurer.

Key details

The main provisions of the new pension system will include:

  • Participation will be open to all employees who are at least three years below normal retirement age (age 62 for men and age 58 for women as of 2022). Once it becomes operational, individuals will be able to open an account online or at a Stravita office.
  • Account holders will be able to suspend participation or modify contribution rates at any time.
  • Employees will have the option to contribute up to 10% of gross pay (in addition to the existing employee contribution rate of 1% for social security) on a tax-deductible basis.
  • Up to 3% of the employer contribution for social security (28% on gross payroll) will be diverted to the employee’s pension insurance at a 1:1 matching rate. Contributions will be fully tax-deductible for the company and will not be taxable to employees.
  • The accounts will be able to be administered and investments directed by Stravita. The rate of return will be based on the central bank's refinancing rate, which is currently 9.25% per annum, plus potential bonuses based on investment experience.
  • At retirement, account holders will be able to claim the benefit in equal monthly tax-free installments over five or 10 years. In the event of death, the benefit will be inheritable.

Employer implications

The new arrangement is intended to be cost-neutral for employers, so the direct impact on employers will be modest; however, employers should be aware of and plan for resulting process changes (e.g., withholding and transfer of employee contributions). None of the companies surveyed by Willis Towers Watson offer supplemental retirement benefits, and it’s not expected that these reforms would stimulate the practice. According to the Ministry of Labor and Social Protection, only around 5% of the population have opened voluntary arrangements. The average monthly contribution for pension insurance was only 52 Belarusian rubles (equal to approximately US$22), according to Stravita. Individuals with an existing arrangement will have the option to convert existing plans to the new model.

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