World Experience and Russian Practice of the Pension System’s Revenue Formation: Mathematic Methods of Estimation

Sergey A. Budko, Dmitry Yu. Fedotov


The article is devoted to the methods of revenue formation of the Pension system. Effective functioning of the Pension system in any country depends on the applied methods of revenue formation of the State Pension system. Thus, the problems of the Russian pension system disclosed in the article are caused by the inefficient methods of revenue formation of the Pension Fund of Russia. The theoretical views on conditions that determine the quality of the work of the pension system are reviewed. The methods of revenue formation of State pension systems in different countries of the world and conducted pension reforms are analyzed. The studies evaluating the effectiveness and sustainability of State pension systems usually use mathematical methods and actuarial calculations. Mathematical apparatus applied in the article allowed calculating the formal conditions of balance of the State pension system, considering compliance with the equivalency and compensatory contributions and payments. The publication outlines the mathematical formulas that describe the conditions of equivalence and retribution observance. The study revealed that the methods of revenue formation of State pension systems are social insurance and social security. Social insurance applies the techniques of pension social risks redistributing insurance and social security uses tax tricks redistribution of the National income. The method of social security reduces the motivation of contributors to pay obligatory payments to the State Pension Fund. Therefore, in Russia there is significant evasion. The authors considered using the distribution and accumulation method of revenue formation of the State Pension system. The article demonstrates that, various methods of revenue formation of the State Pension system are actively used in the world


1. The balance between the pension system revenue and the expenses for pensions is an important characteristics of a national pension systems

2. The stability of the pension system based on the distribution method of forming revenue is ensured by the compliance of the insurance premium tariff with the macroeconomic and demographic conditions of the country’s development; the stability of the pension system based on a funded method of forming revenue is ensured by the real annual return of pension savings placed in investment assets

3. The Russian pension system is unbalanced due to the significant scale of evasion from the pension insurance contributions

4. Mathematical calculations have shown that solving the problems of the Russian pension system is possible by increasing the motivation of citizens and organizations to pay the pension insurance contributions; expand the application of the funded method of pension system revenue formation and ensure a real level of return on the assets of pension savings

For citation

Budko S. A., Fedotov D. Yu. World Experience and Russian Practice of the Pension System’s Revenue Formation: Mathematic Methods of Estimation. Journal of Tax Reform, 2017, vol. 3, no. 3, pp. 199–215. DOI:

Article info

Received October 19, 2017; accepted November 27, 2017


pension, Pension Fund, pension insurance, revenue, tax, grant, tax evasion, mathematical methods, pension accumulation, international experience


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