When and how Ukraine will raise pensions

The Ukrainians get the lowest pensions in Europe. Earlier this year, the government took a decision on double increase of the minimum wage. As a result, expect in the Cabinet, in the Pension Fund (PF) will have additional funds for a significant increase in pensions. The website “Today” found as PF increased wages and when Ukraine will increase pension.

When to expect higher pension

Last year the Minister of social policy Andrei Reva announced the coming of “modernity” of pensions, which, as the Reva, significantly raise the income of Ukrainians in retirement. This year the television broadcast, the Minister voiced the calculations of how I will grow as a result of “modernizing” the retirement of his mother. “My mother is 49 years of experience and she has the same pension (1500 hryvnia – ed.). I felt from her pension (after “modernization” – ed.) will increase more than in two times,” – said the official. At this moment the “legacy” pensions received 8.5 out of 12 million pensioners. This is due to the fact that when calculating retirement account for the average country wage. The last time the index was counted in 2012, from this moment the average salary in Ukraine has increased from 3377 to 6008 hryvnia.

According to the calculations of the Cabinet, the “modernizing” of pensions will cost 30-40 billion hryvnia. Experts are sure to collect an additional sum will be extremely difficult. “Of course, so they are unlikely to collect. The figures given are very different. The modernizing was said Rozenko (Vice Prime Minister of Ukraine – ed.) 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 senior researcher of the Institute of demography and social studies Lydia Tkachenko.

On request “Today,” the Pension Fund said in the budget for this year is “modernization” of pensions is not provided. “The budget are based on current legislation. Legislative decisions about the modernization level of pensions at the moment”, – said the Agency.

Money on recalculation of pensions to plan for the expense of an overfulfillment of the budget of the Pension Fund. In an interview with one of the online publications Pavlo Rozenko said: “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 about the “modernization” of pensions”.

The pension Fund is replenished by contributions from employees of Ukrainians (22% of ERUs from each paycheck). For the first two months of last year, the PF has received 17.7 billion hryvnia, and for the first two months of 2017 20.6 billion hryvnia. Just this year the budget provides for revenues from ERUs in the amount 163,6 billion hryvnias, and last year – 107,1 billion. Despite this, the “hole” PF this year will be at 141 billion hryvnia (deficit compensated from the state Treasury).

However, even if the decision about “modernizing” and will not be made, the Ukrainian pensioners are waiting for the indexation of pensions in two stages. In may it will raise 1247 to 1312 hryvnia, and in December – up to 1373 UAH.

Whether to raise the retirement age

If the retirement age in Ukraine to improve, I’m sure an expert in the field of pensions Galina Tretyakov, the FS budget can save about one billion hryvnia. Deputy Prime Minister Pavlo Rozenko said: raise the retirement age in Ukraine is impossible due to low life expectancy. “I do not see the ability to adjust for age without an increase in life expectancy in the country. In men, it averages 65 years,” the official said.

At the same time, experts note: on the pension system, life expectancy is not affected, the length of life after age 60. Thus, according to the Ministry of social policy, men who live to retirement age, live on average a further 16 years and women 20 years. This is due to the fact that data on life expectancy takes into account mortality at birth, mortality in traffic accidents and so on. As noted by the chief of the country demographer Ella Libanova, many Ukrainians until retirement not just survive. The risk for Ukrainians die before the age of 60 years – 40%. “It is particularly dangerous period of life from 40 to 60 years. It’s just a national disaster, the situation is completely changed since 1985,” said demographer at the lecture hall of the “Key aspects of pension reform.”
According to estimates of the Institute of demography, if you increase the retirement age to 65 years – the number of pensioners will decrease by one million. If to 62 years – 500 thousand.

“International standards like the Convention on social security, suggesting that retirement age is 65 years you can set no matter what the circumstances. In fact, to say that direct limits in international practice there. Low retirement age is not accompanied by a prolonged lifespan. People who live to 60 years, with the same probability will live up to 63 years”, says Lydia Tkachenko.

“International standards like the Convention on social security, suggesting that retirement age is 65 years you can set no matter what the circumstances. In fact, to say that direct limits in international practice there. Low retirement age is not accompanied by a prolonged lifespan. People who live to 60 years, with the same probability will live up to 63 years”, says Lydia Tkachenko.

At the moment, plans to revise the retirement age, no PF, no Cabinet, no Parliament.

Launch in Ukraine, cumulative Fund

Currently funded level of the pension system still remains in question. PF said that in this year to run it definitely will not succeed. And Minipalette remind: under the law the cumulative level work after having eliminated the deficit of the solidarity system.

If the decision still will be, to replenish the savings rate will be a tax. That is, as now, 22% of salary will have to pay to the joint system, several cent, in cumulative. In one of the bills on pension reform had assumed that all the Ukrainians under the age of 35 have to pay extra 2% of salary to personal pension accounts in 2017, and 2022 – 7 percent.

Money should be accumulated until retirement age. To 60 years, if you run a cumulative level, the Ukrainians will be able to receive two pensions. Those who have already retired, the pension level will not be affected. Says Andriy Reva, guarantees that money in the savings Fund is not “eaten” by inflation, no. Experts explain that the cumulative level of “right” works in the advanced economies, where the inflation rate may fluctuate within a few percent. We have, over the last three years rates, according to the NBU, increased by 80%. That is to ensure that the savings are not “ate” inflation, with 2014 cumulative Fund was supposed to increase savings by 1.8 times. This, I’m sure Reva, is almost impossible.

“In 2015, the inflation rate was 49%. What is the yield on the paper had to have last year, for RS 100, you have invested the year before? You can call structure in Ukraine, which 20 years is able to give at least 2% above the rate of inflation today? Nowhere to put it. Even if the money we hypothetically found, but to invest in the country nowhere. Let’s move abroad will saturate the economy?”, the Minister said in an interview with “Today”.

By the way, according to Prime Minister Vladimir Groisman, the Cabinet presents the Ukrainians, the draft pension reform after a few months. As you know, the missing insurance period can be purchased at a price of 704 hryvnias per month, and working Ukrainians with high pensions can deliver before a choice: either a pension or a job.