Retired Robots

What will happen to the pension system in half a century

Evgeny Yakushev, Chairman of the Board of Directors of the NPF "European Pension Fund" (JSC)
Forbes, 07.07.2016

Today's discussion about the forks of the pension system, the deficit of the pension budget and the fate of the funded pension completely loses its meaning if you look 50 years ahead. What awaits pensioners in the future?

Isaac Asimov, Robert Sheckley and other science fiction writers in the last century foresaw the possibilities and dangers of the development of artificial intelligence and intelligent robots. If until recently such projects were voiced mainly by writers, then Boston Dynamics presented real-life prototypes of humanoid robots.

Now economists have also taken care of the problem of robotization.

At the end of May, the European Parliament issued a report in which it proposed to give autonomous robots the status of "electronic persons" and oblige their owners to pay insurance premiums for them.

Robots occupy people's jobs, according to the Commission of the European Parliament. In this case, taxes and contributions must be paid for them. A new industrial revolution is coming, the authors of the report are sure, and measures should be taken now to protect the interests of pensioners.

The fears are well-founded for Russia. Now one of the main problems is the imbalance of income and expenses of the Pension Fund of Russia (PFR). Working citizens pay insurance premiums, which are used to pay pensions to current pensioners. The FIU can no longer pay pensions to all pensioners of the country at the expense of its income. We have to resort to the help of the federal budget, and if it does not have enough funds, then "freeze" pension savings and reduce the level of pension indexation.

During the Soviet era, all citizens were obliged to work, the state struggled with parasitism, and employment reached 100%. Currently, out of 75 million economically active citizens, only 45 million people (or 60%) are employed and pay insurance premiums. There is a high proportion of self-employed people who pay insurance premiums at reduced rates or do not pay them at all. According to official data, the share of "gray" employment reaches 25%.

In addition to general economic matters, demography has a significant impact on the pension system. A small group of grandchildren of the generation "knocked out by the war" enters the labor relationship, and post-war "baby boomers" retire. In recent years, the number of pensioners has been growing by about 500,000 people per year. According to experts, in 2025 the number of working and retired people will be equal.

The above estimates do not take into account the possible robotization of the modern world. In the period from 2010 to 2014, the average sales growth of robots was 17% per year, and in 2014 sales increased by 29%. This is the highest year-on-year indicator for the entire time of robot sales.

The introduction of robotics and artificial intelligence, according to the report of the Commission of the European Parliament, can have a serious impact on employment and, as a result, on the viability of the social security system of states, therefore it is necessary to assess the consequences of the industrial revolution for the pension system. The growth in the number of people in free and creative professions will be accompanied by a change in the system of remuneration for their work. Instead of a permanent salary (with payment of all taxes and insurance premiums) they will be content with casual earnings or freelance employment with direct payment for the work done.

No matter what, when they retire, they will expect that they, like their parents, will be supported by the state.

And here, in addition to the question "what to keep them for?", there is another problem. Namely, how long will it be necessary to pay them a pension?

Longevity and pension payments

The other day, an American Liz Parrish, the head of BioViva, flew to Moscow. Some time ago, she injected genetic material into her vein, which should penetrate into the nucleus of each of her cells and trigger changes that rejuvenate the body. They say Liz will be twenty years younger. If the gene therapy proves successful, then in a few decades the vaccination against aging will be able to be administered to everyone, and old age will be considered a defeated disease. And there will be a lot of people who want to – after all, humanity has been solving the secret of prolonging life and slowing down aging for a very long time. And, in general, successfully. Only now it is an evolutionary process. People live longer, and this is due to the development of medicine, a decrease in child mortality and an overall increase in living standards.

With all the positivity of this fact, experts led by the World Bank have been sounding the alarm for a long time. The share of older citizens is steadily growing. In the Middle Ages, the average life expectancy was 30-40 years, and fifty-year-olds were considered long-livers. At the beginning of the twentieth century in European countries, life expectancy reached 60 years, and at the beginning of the XXI century – already 80. In Russia, over the past ten years, the average life expectancy has increased by six years to 76.5 years for women and 65.3 years for men. Such colossal changes in the quality of life actually took place before the eyes of one or two generations.

When calculating monthly payments of an old-age pension (both accumulative and insurance), such a key indicator as the expected survival period is used. Now it is 234 months (or 19.5 years), and next year it will presumably be increased to 240 months. At retirement, the accumulated pension rights and money are divided by the period of survival and the amount of the benefit that a person will receive monthly until his death is "deducted".

The principle of large numbers works – someone does not survive, someone experiences the average, but statistics never deceive.

Now imagine that thanks to Liz Parrish (or any active researcher), the life of pensioners is extended for another twenty years. Insurance companies and pension funds will be under attack, as they issued annuities (pension payment schedules) based on outdated ideas about life expectancy.

Financiers will have to hire a full-time futurologist who will be able to give an adequate forecast of the future and, together with an actuary, develop the right strategy for working with clients. It seems that these and other upcoming innovative changes do not apply to us. This belief is false. Progress is accelerating: what seemed impossible a couple of years ago is now acquiring complete features. Anyone who does not take into account the changing reality will get an unsolvable problem in decades. People will work less and live longer. Just for what? What is not a task for the future government? There will be hope that in fifty years Russians will already learn to save for old age.

Portal "Eternal youth" http://vechnayamolodost.ru  07.07.2016