Starting in 2024, Ukraine plans to introduce a pension reform that will introduce two main pension systems: mandatory accumulative and point-based. This information was announced by Lidia Tkachenko, a senior research fellow at the Institute of Demography and Social Research, on Hromadske Radio.
According to Tkachenko, the issue of pension reform will be relevant for Ukrainians for a long time. Today, there are about 10 million pensioners in Ukraine, and the average pension is only 5 thousand hryvnias. Despite this, pension expenses remain one of the largest among other social expenditures. “The budget of the Pension Fund is crazy money,” the expert noted.
Accumulation system: on individual accounts
One of the main proposals for the reforms is the introduction of a mandatory funded pension system. Deductions from the salaries of Ukrainians will no longer be paid into the Pension Fund, but into the individual accounts of each taxpayer in the new State Funded Pension Fund. The Cabinet of Ministers has yet to develop a mechanism for its creation.
Lidia Tkachenko emphasized that such a system could be very useful, as the funds that will flow into the savings fund can be invested, in particular, in domestic government bonds. This will create a guaranteed buyer for these bonds.
Points system for calculating pensions
The second part of the reform is a points system for calculating pensions. Under this system, insurance contributions paid or paid by citizens to the Pension Fund will be converted into points, which will depend on the ratio of a person's salary to the average salary in Ukraine. Each year, the points accrued will be recalculated in accordance with the current average salary, which will allow maintaining the relevance of pension payments for those who have already retired.
Forecasts and challenges of reform
Lidiya Tkachenko emphasized that the issue of pension reform will remain in the focus of Ukrainians' attention for a long time. In particular, she noted that the norm included in the draft law on the state budget for next year does not contain enough specifics regarding the implementation of pension reform. However, she suggests that this draft law may provide for a mandatory funded pension system.
Ukraine currently operates a solidarity system, where employed individuals pay single social contributions, part of which goes towards pension benefits. The reform aims to gradually change this system to ensure a more stable and fair pension system in the country.
