DEFINITION of 'National Welfare Fund (Russia)'

The National Welfare Fund in Russia is a sovereign wealth fund that invests abroad to counteract inflation and guarantee the functioning of Russia’s pension system.

Breaking It Down

The National Welfare Fund is managed by the Russian Ministry of Finance, and its primary purpose is to guarantee long-term functioning of the pension system and also to aid in balancing the budget of the Pension Fund for the Russian Federation, which assigns and pays different types of pensions and social benefits to Russian citizens. It also serves to reduce inflationary pressure and protect the economy from potential volatility from oil and gas export earnings. The National Welfare Fund invests in corporate bonds and stocks outside of Russia.

History of the National Welfare Fund

On January 1, 2004, Russia established the Stabilization Fund to balance the Russian government’s federal budget when global oil and gas prices were rising. In 2008, the Stabilization Fund was divided into two funds, the Reserve Fund and the National Welfare Fund. The Reserve Fund invested in conservative foreign investments and was used as a stabilization fund to balance the federal budget. The National Welfare Fund managed pensions and invested in infrastructure, and invested more aggressively than the Reserve Fund.

Combined, the Reserve Fund and National Welfare Fund made up one of the largest sovereign wealth funds in the country. However, the Reserve Fund was emptied by 2017 and officially dissolved January 1, 2018. What remained in that fund was merged with the National Welfare Fund.

The National Welfare Fund Today

The National Welfare Fund now serves as Russia’s only reserve fund, and in addition to its pension system management has taken over budget balancing tasks. Additionally, all excess oil and gas revenues which were previously accumulated in the Reserve Fund are now paid into the National Welfare Fund. The National Welfare Fund also accumulates revenue from its management of investments.

BREAKING DOWN 'National Welfare Fund (Russia)'

RELATED TERMS
  1. Welfare

    Welfare is a government program which provides financial aid ...
  2. Welfare Loss Of Taxation

    Welfare loss of taxation refers to the decreased economic well-being ...
  3. Government Pension Fund of Norway

    The Government Pension Fund of Norway is comprised of two separate ...
  4. National Social Security Fund (China)

    National Social Security Fund (China) is a government-controlled ...
  5. Sovereign Fund Of Brazil

    The Sovereign Fund of Brazil is a sovereign wealth fund for the ...
  6. Closed Fund

    A closed fund is a fund that is closed to investors, either temporarily ...
Related Articles
  1. Financial Advisor

    How Bad is Russia's Economy?

    The Russian economy is facing many headwinds. It could get worse before it gets better.
  2. Investing

    An Introduction To Sovereign Wealth Funds

    Countries use sovereign wealth funds to stabilize their economies, but these investments can lack transparency.
  3. Financial Advisor

    How Capital Gains Tax Works on Pension Funds

    Here's why capital gains tax does not affect the assets in pension funds.
  4. Retirement

    Watch Out for These Hidden Pension Fees

    You’re not likely to even detect pension fees unless a pension fund puts them in disclosure documents. But more recipients are beginning to ask questions.
  5. Investing

    3 Mutual Funds With Russian Exposure

    Learn about the top three mutual funds that focus on investing in Russian equities and other emerging market countries of Eastern Europe.
  6. Investing

    How Bad Will It Get for Russia in 2016?

    With an economy that is highly dependent on oil and gas exports, the shrinking oil prices have hit Russia hard. This bad news begs a question: is Russia’s economy headed for collapse in 2016?
  7. Investing

    Why The Russian Economy Rises and Falls With Oil

    The Russian economy depends on profitable oil production to pay for the cost of government, prop up the ruble, and provide most of it exports revenue.
  8. Taxes

    What Countries Get For Their High Taxes

    Are there advantages to having the highest taxes in the world? Let's take a look at what the citizens in these countries get for their money.
  9. Investing

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
RELATED FAQS
  1. Mutual funds versus money market funds

    Learn what mutual funds and money market funds are and understand the differences between each, as well as how they serve ... Read Answer >>
Trading Center