for more than ten years. The operations of the PFE were challenged by both the General Inspectorate of Banking Supervision of the National Bank of Poland (the central bank) and by the Insurance Department of the Ministry of Finance. The two regulatory agencies claimed that the PFE was engaged without license in banking and insurance activities. In response to these challenges the PFE restricted its activities. However, the prosecution authorities were forced to drop their investigations because cooperatives are not subject to supervision by either agency. This underscores the need for enacting a proper pension fund legislation and for clarifying which government agency should have responsibility for licensing and supervising them.

**Private Pension Funds in Russia.** Following the Presidential Decree No. 1077 of 16 September 1992, it is estimated that about 300 so-called non-state pension funds have been established in Russia"<sup>4</sup> . Most have been created in 1994 and their number seems to be growing quite rapidly. They are generally very small and operate more like savings banks than long-term pension funds. There appear, however, to be some exceptions involving funds that intend to operate as proper pension funds.

A draft law. has been prepared for the authorization and regulation of nonstate pension funds, but it is not clear how soon this law will be enacted. In the meantime, pension funds operate in a regulatory vacuum, which not only allows their founders to engage in misleading advertising campaigns, but also leaves considerable room for variations in practice. The situation is pretty chaotic with little standardization in services and products, charges, or investment practices. Most funds are based on defined contribution plans with individual capitalization accounts for their members, but sorw additional benefits and are more akin to defined benefit plans. Some funds also have rules that allow withdrawals during unemployment spells. Most funds direct their selling efforts toward employers. Even though some funds engage in advertising oriented toward individual workers, the main emphasis is placed on signing up firms.

The small pension funds invest their assets in bank deposits and promise a guaranteed return to members that is no less than the rate offered on SBER savings deposits. Other pension funds diversify their investments into bonds and some equities and adopt internal rules based on international practice, with regard to investment diversification, information disclosure and operating commissions.

Membership in most funds is small, rarely exceeding several thousand. However, some funds (e.g the fund for electric power workers) have tremendous expansion potential. Assets are generally also quite small, mostly less than I billion rubles (half a million dollars), though one of the funds already has 17 billion rubles. Most pension funds invest their assets locally, unless their management company has a foreign currency license in which case they may also invest in overseas assets.

14 This section draws on the findings of a World Bank mission to Russia in July 1994 and interviews with representatives of several pension funds.

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