OREANDA-NEWS. August 18, 2008. Minfin proposes cutting the Reserve Fund from 10% of GDP to 6% of GDP starting 2010 and these funds should be allocated to the National Welfare Fund (NWF), from which pension payments will be financed, vice PM and finance minister Alexey Kudrin said.

"We believe that it is necessary to increase NWF and glue NWF to the Pension Fund" – he said. The finance ministry calls for maintaining the replacement ratio (the ratio between the average pension and the average wage) at 30%.

Kudrin noted that, apart from tax measures with regard to employers and individuals, starting 2010 the source of financing pension payments will become the constant transfer of 0.6% of GDP from NWF to the Pension Fund until cumulative resources are fully spent.

As NWF will receive additional funds following a reduction in the Reserve Fund, it will be generating higher profit from investment activities, and this will help maintain the permanent transfer of funds to the pension system.

"In a few years the transfer of 0.6% of GDP will come only from investment income, but not always. Therefore, the fund's resources will decrease at a gradual pace" – Kudrin pointed out. Based on MinFin estimates, the NWF will be fully spent in 2027.