The Russian Government approves requirements for non-state pension funds licensing on the provision of voluntary and mandatory pensions

In line with the ongoing pension reform which makes it possible for non-state pension funds to accumulate mandatory pension contributions and manage the pension savings of Russian citizens principally as of 1 July 2004, the Russian Government approved regulations on 5 December 2003 "On the Licencing of Non-State Pension Funds on the Provision of Voluntary and Mandatory Pensions", No. 735 (the "Regulations"). Until very recently no new non-state pension funds could have been set up as licensing requirements and responsible state bodies have not been identified. With the adoption of the Regulations the licensing process can be resumed.

The Regulations set out requirements for non-state pension funds (the "NPF") functioning under the second and the third pillars of the pension reform, i.e. upon the entering by NPF into agreements on the voluntary or mandatory pension provision.

All NPFs intending to accumulate the pension savings of Russian citizens and/or to participate in the mandatory pension provision must obtain a licence from the Ministry of Labour and Social Development of the Russian Federation. Applicants must comply with a number of requirements which are set out in the Regulations. The requirements are, among others, as follows:

• the property of an NPF, as at the date of submission of the necessary documents to the Ministry, must be equal to at least 3 million Russian Roubles (approximately US$ 100,000). Monetary contributions in the above amount must be made (As of 1 January 2005, the monetary contribution of an NPF's assets must be equal to at least 30 million Russian Roubles (approximately US$ 1 million));

• an NPF must prove that it has observed the Rules for Placing Pension Reserves as stipulated in the Ministry's earlier Order, i.e. for example, investments of pension reserves into companies' shares and bonds must not exceed 50% of the total amount of the pension reserves of an NPF;

• an NPF must maintain separate record keeping of the second (mandatory) and the third (voluntary) pension contributions and savings; and

• an NPF's general manager must have at least three-years' experience in the insurance/finance sector or in an NPF.

The list of documents for submission to the Ministry to prove that the applicant has observed the above requirements is set out in the Regulations. The Ministry must decide on the issue of a licence within 60 days from the date of submission of all the required documents. The licence is valid for in indefinite term. The Ministry is entitled to check the compliance of an NPF no more frequently than once every two years.

For further information please contact Leonid Zubarev at [email protected].