When Ukrainians to expect a radical increase in pensions

Ukraine has one of the lowest pensions in Europe: at the moment, the minimum payout for Ukrainians “retired” reaches only 1,247 USD. Despite this, the Pension Fund deficit for several years passes for 140 billion hryvnia. This year the government has raised twice the minimum wage and to announce a radical increase in pensions. The website “Today” found out, when Ukrainians to wait for new pensions and where to get the money.

Whether to wait for the Ukrainians a radical increase in pensions

A few weeks ago, the Cabinet approved the Pension Fund budget (PF) for this year: retired plan to spend about 284 billion (last year was 257 billion). Almost half of this amount – the deficit of the Pension Fund, which compensate for the expense of the state budget, the rest – receipts from social contributions. Last year, the “hole” in the budget of PF has reached 145 billion, and this year, according to the approved plan, will be reduced to 141,5 billion.

The difficult economic situation and the temporary loss of Donbass is reflected in the Pension Fund. In 2015, says the senior researcher of the Institute of demography and social studies Lydia Tkachenko, the number of employees in the military conflict declined by two million people. “In the Donbas were companies with high salaries, who often paid them “in the white”, they were paid contributions to the Pension Fund. It so happened that Ukraine has lost two million contributors, while the majority of pensioners in this area, those who signed up for government-controlled areas and continue to receive a pension,” – says a scientist.

Another “impact” on the pension system occurred in early 2016, when the government decided to reduce the size of the single social contribution almost two times – up to 22% of salary. As a result, only last year, the PF deficit increased by 53 billion hryvnia.

2017, as predicted in the Cabinet, will be the first year when the shortage will be reduced. A slight reduction in the “hole” provided by the growth of the minimal salary in half.

“It should be noted that consistent deficit of the Pension Fund began to reduce its deficit. It is our task only – the development of the national economy, the formation of a national resource and the reinvestment of these resources in the quality of life of Ukrainians”, – said the Prime Minister Volodymyr Groysman at the meeting of the National tripartite socio-economic Council last week.

“It should be noted that consistent deficit of the Pension Fund began to reduce its deficit. It is our task only – the development of the national economy, the formation of a national resource and the reinvestment of these resources in the quality of life of Ukrainians”, – said Prime Minister Vladimir Groisman.

The Pension Fund budget due to the increase of the minimal salary will have an additional 14.8 billion hryvnias, told the “Today” Deputy Chairman PF Mykola Shambir. “It means that you want to obtain from raising the minimum wage. But I want to say at once that there was not a linear increase of wages is changing its structure. With the month of December, for example, the minimum salary is 1600 UAH we are talking in most cases about the minimum official salary. And the minimum wage since January is to pay with all the allowances below which to pay wages is impossible”, – says the official.

Whether the “modernization” of pensions

The budget provides for the indexation of the minimum pension in two stages. In may it will raise up to 1247 1373 hryvnia, and in December – up to 1373 UAH. In addition, Deputy Prime Minister Pavlo Rozenko announced this year’s “modernizing” of payments, it will affect about five million retirees. How it will be “modernity”, is currently unknown. However, the PF said – pensions recalculated, with the new average wage.

“The mechanism, in principle, proven, because we have a pension depends on seniority and wages. The only issue is that in the formula of calculation of pension size is an indicator such as average wage, which Sovremennaya, in fact, the pension. This figure is the reason that the old pensioners it is the amount of pension was not changed. The change in this indicator – this is the mechanism of modernization. How it will change the issue is resolved”, – said Mykola Shambir.

“Modernity” in the FS budget is not provided, it will have to look for funds advanced. Rozenko in an interview with “Observer” said, the decision will be if the plan of filling of the Fund will be exceeded.

“Raising the minimum wage after the first month gave additional replenishment of the Pension Fund of 18%, that is, we are 18% collected more than was planned for January 2017. If we keep this momentum, if we see that the business understood that it is necessary to legalize and pay taxes… of course, we will take a decision about an additional increase of pensions, or the carrying out of modernization of pensions. Because every increase has its price,” – said the official.

According to the calculations of the Cabinet, the pension modernization will cost 30-40 billion hryvnia. Experts are sure to collect the additional amount will be very difficult. “Of course, so they are unlikely to collect. The figures given are very different. The modernizing was said Rozenko, need 40 billion. We did a calculation, which it looked like I was about 70 billion hryvnia to significantly modernize pension. So much money they do not collect. And it is difficult to estimate how many will get their salaries, what will be the dynamics of what will happen to the economy,” says Lydia Tkachenko.

If you modernize the pension without additional income to the pension “hole” in its budget will once again increase. But one of the conditions of the IMF to reduce the deficit of the pension system.

Where to get money for “modernizing”

Revenues to the Pension Fund depend on the level of wages. The main obstacle that separates Ukrainians from high pensions, low wages. As forecast at the Institute of demography and social studies, this year, even with the positive economic scenario, the national average salary will grow to a maximum of 25%.

Options for increasing revenues to the pension Fund is considered in the framework of the pension reform. One of them is obligatory for all working Ukrainians. Now 16 million Ukrainians Pension Fund contributions are paid only 10 million people, the rest (service workers, farmers etc), have the right not to pay a “tax on pensions”.

If required to pay all income to the pension Fund will grow. But, says Lydia Tkachenko, not all Ukrainians have the ability to pay at least 704 UAH (the minimum contribution) to the pension Fund. “If one is engaged in subsistence farming, it just may not have that kind of money,” – said the scientist.

Your suggestions are also voiced by the IMF. So, the Director of the European Department of the Fund, Paul Thomsen believes that the first steps of “may be increasing the age of retirement for multiple categories”, which is beyond the scope of the General conditions, and have special privileges, i.e. the beneficiaries. However, the Cabinet to review the age of retirement refuse.