be required to align the interests of the pension fund managers with those of the contributors (reserve requirement), but no capital should be expected to guarantee future payments.

# 6.2 Transparency and Disclosure

**The Pension Fund of Russia operates with higher levels of transparency than NPFs** . While data about returns, fees and portfolio composition is widely available for the funded pension fund managed by the PFR-VEB and PFR-AM, the information is relatively scarce in the case of NPFs. As a single provider of information, the PFR has provided quarterly information since 2004 about returns, fees and portfolio composition of pension funds. The information is much scarcer in the case of NPFs. FFMS presents data in different formats over time and with long lags, which makes comparability difficult. The data presented by the NPFs on their web pages is not always meaningful, and in most of the cases the information is not available after 2007.<sup>14</sup> Some funds present the data on returns in a time weighted manner or combined with the returns of the third pillar pension funds.

**The official data presents some logical inconsistencies, which raises doubts about its quality.** For example, the fact that some aggregate assets under management in individual pension funds have remained totally unchanged for two to three quarters raises questions about the valuation procedures used in relation to the pension fund. Since pension funds also manage voluntary pension funds, in many cases is not easy to identify whether the information presented is related to the mandatory, voluntary, or a combination of the two pension funds. Even for a population with a high level of literacy, the information presented would not be enough to make an informed portfolio selection. Since the quality of the information is insufficient to ensure a competitive market, it is not surprising that the large majority of the population has not made an active portfolio selection.

# 6.3 Delays

**Due to delays in reconciliation, individuals were able to receive contributions in their individual accounts only after a lapse of time that varies between 15 and 18 months** . Until February 2010, contributions were collected by the Tax Authority and the money subsequently transferred to PFR. Since the tax loop operates on an annual basis, it was difficult to make reconciliations in shorter periods of time. In 2010, PFR began collecting contributions on a monthly basis, and resources are expected to be transferred to the asset managers or NPS within six months after the end of the quarter. This new procedure is expected to reduce the lag time to six to nine months. This period of time is still relatively long compared with other countries with centralized collection, including Poland (two weeks), Hungary (three months), Slovakia (two weeks), Estonia (one week) and Lithuania (three months).

**It is necessary to clarify the ownership of the funds that are managed by the PFR-VEB and PFRAM.** The authorities argue that the time lag is based on the concept that the funds that stay at the PFR belong to the Russian Federation and not to the individuals. The lack of clarity on the ownership of the

> 14 As of March 2010, the latest returns published by FFMS go back to 2007.

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