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FEATURE-Young Russians start to think about their old age
By Andrew Hurst

MOSCOW, Jan 27 (Reuters) - In a land where many men die from drink or
exhaustion before they get old, it is hard to imagine anyone in Russia
saving for a rainy day.

But as a traumatic 15-year roller-coaster ride from communism to
rough-and-tumble capitalism heads for calmer waters, many younger Russians
are starting to do just that.

As living standards rise, they are not just grasping the moment by
travelling abroad and buying Western fashion clothes. Young professionals
are sparing a thought for the future by taking out life insurance and
private pensions.

Four years of stability since a financial meltdown wiped out many people's
life savings in 1998 have started to take hold in the public imagination.

"There is a big increase in financial savings which is built on secure
ground," said Al Breech, an analyst at Brunswick Warburg. "The personal
savings rate has probably increased notably.

Optimists believe that as Russia's middle class grows and living standards
rise steadily, fuelled by economic growth which has brought better real
income for most people with jobs, people will expect to live longer and
will make plans accordingly.

"Definitely the younger generation is more ready (to save). The older
generation when they were at the age of today's youth were very different,"
said Alexander Zvaretskiy, general manager of U.S. insurer AIG Life in Moscow.

Zvaretskiy said AIG Life's sales of life and health insurance policies had
soared by 70 percent in 2002 and were forecast to jump the same amount this
year. This rate of growth is comparable to other emerging economies, he said.


Russia's chronically low life expectancy for men -- 57 compared to well
over 70 in western Europe -- is a legacy of the slow decay of the Soviet
Union in the 1980s. Binge drinking brought on by despair took a toll on the
lives of many Russians.

The crisis worsened as the collapse of the Soviet Union and the birth of a
winner-takes-all brand of capitalism in the 1990s brought misery to
millions who saw their lives torn apart by economic dislocation and inflation.

Women in Russia live far longer than their men folk with an average life
expectancy of 72.

But so few male Russians live long enough to draw a pension at 60 that its
system runs a surplus -- a stunning contrast to countries with ageing
populations such as Germany whose pension schemes are threatened with

Russia has run a so-called "pay-as-you-go" pensions system which means
pensions are paid out of taxes levied on the salaries of the working
population, and has introduced partly funded pension accounts to top it up.

"In Germany, as population growth slows, pay-as-you-go becomes
unsustainable. But in Russia it can survive with a declining population
because dead men don't get pensions," said Christof Ruehl, the World Bank's
chief economist in Russia.

If people don't expect a long life it is quite rational for them not to
bother to save, economists say.

But young well-paid Russians do expect to live until they are old, and want
to put money by for later even though a history of low life expectancy
among older men means life insurance premiums are higher in Russia than in
the West.

"It does not affect the desire to save," said AIG Life's Zvaretskiy. "But
it does affect the premiums."

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