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. Last Updated: 07/27/2016

Saving for a Rainy Day Becoming All the Rage

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 traveling 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, fueled by economic growth that 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 Zvaretsky, general manager of U.S. insurer AIG Life in Moscow.

Zvaretsky 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 brought misery to millions.

Women in Russia live far longer than their men 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 aging populations such as Germany whose pension schemes are threatened with collapse.

Russia has run a so-called "pay-as-you-go" pension 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 R?hl, 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 save 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 Zvaretsky. "But it does affect the premiums."