1994 was a very challenging time for starting up a corporate pension system in Russia. The newly established private pension market was at its very early stage of development. The economy suffered bearing costs of the transition from plan to market. The old-fashioned national PAYG system was unsustainable due to the huge arrears in tax collection and hyperinflation. The drop in retirement income was incredibly large: the replacement rate was at the lowest level since 1985.

At that particular time Russian giant Gazprom moved forward with establishing the largest corporate pension plan in Russia. It was aimed to finance additional retirement income to Gazprom’s employees. To meet this challenging objective NPF Gazfond was founded in October 1994. No one predicted at the time that it was the start of a new era for private pensions in Russia.

From its early days Gazfond has confidently grasped the leadership position in the newly developed market.

After one year of operation the fund started paying out its first lifetime pensions to gas-industry veterans. The pension benefit was calculated at a level exceeding the old-age state pension with the appropriate indexation during the payment period. It was a real success. Now the corporate pension system covers employees of 170 employers in the Russian gas industry. Gazfond provides its services to several multinational companies with branches in Russia.

Gazfond demonstrated impressive growth dynamics: its assets doubled each year and now it is the biggest national private pension fund. Its total assets and pension payments are the highest in the Russian market.  As of 1 October 2010, Gazfond accumulated 279.9bn RUB ($9.3bn) in assets, representing more than 45 percent of total assets accumulated by all Russian pension funds.

In 2002 Russia embarked on a large scale pension reform. Its goal was to improve pension benefits and redesign the old PAYG to the multilevel system with establishing a mandatory funded component. The pension reform also provided employees with a right to make decisions on who will operate their funded pension accounts. All individuals born after 1967 may now transfer their savings to the non-state pension fund from the Pension Fund of Russia. In 2004 in response to the new opportunity Gazfond started servicing the open market, providing a wide range of pension products: both corporate and individual pension plans for the various industries as well as mandatory social insurance.

Today Gazfond operates about 400,000 individual accounts. About 50,000 of the fund’s clients accumulate voluntary pension savings. It pays out pension benefits to more than 85,000 individuals at an average of 6,418 RUB per month. Gazfond runs more than 420 corporate pension plans and a large number of accounts for non-gas industries; currently it is represented in more than 60 Russian regions.

On 1 October 2008 the governmental programme for co-financing of individual voluntary contributions came into force. It provides governmental financial support to those who voluntarily contribute to the individual pension accounts. More than four million Russians entered the system, and Gazfond is an active participant in the programme providing such services for thousands of its clients. After the 2008 financial crisis Gazfond was able to guarantee a zero percent loss on individual accounts opened in the state pension insurance system.

Gazfond is a leader on setting up the industry quality standards. Following its clients’ needs in 2008 it opened the first toll-free call-centre on the Russian pension market, which now serves more than 1,000 clients a week.

In 2010 Gazfond established a new on-line service to providing information and support to those who are unable to contact the fund’s offices and representatives in person.

Gazfond is a co-founder of the National Association of Non-state Pension Funds. As its board member, Gazfond is one of the most active members of this self-regulated organisation. Gazfond participates in a public-private pension dialogue on a permanent basis.

Gazfond is widely represented internationally. This way it gets the best industry practices and is able to be ahead in improving its services. For the moment Gazfond is the only Russian non-state pension fund that obtained a permanent membership at ISSA (International Social Security Association) by the recommendation of the Pension Fund of Russia and the Ministry of Health and Social Development of the Russian Federation.

The fund’s representatives were members of the OECD subgroup on private pensions and contributed to getting associated membership in the sub-group for Russia. Gazfond is a permanent member of the Russell 20-20 International Association.

Since 2008 Gazfond has proved its highest business standards by getting the highest credibility and stability rating A++ from Russian rating agency Expert-RA.

“We are not going to rest on our laurels,” says Dmitry Konshin, Gazfond vice-president, strategy and business development. “Our goal is to improve the level of the Fund’s services on the continuous basis, make our offers more accessible for all groups of citizens everywhere across our country. We are proud of our achievements and we are excited about our future. Though the general understanding and awareness of the population considering the importance of their future pensions funding still remains at a very premature level we believe that shortly we will demonstrate even more impressive performance results.”