Who and when to raise the “pension tax” in Ukraine: why pay more

Ukraine plans to increase the rate of the unified social tax (Ust) for employees who are entitled to preferential retirement (miners, actors, subway workers, etc.). Employers will have to pay the state 15 or 7% of the salary of the employee engaged in hazardous work. It is worth noting that a year and a half ago, the Ust rate has reduced from 41 to 22%, then the Pension Fund deficit reached a record high and social policy Minister called the situation “critical.” Now the “pension tax” again decided to raise, but not for all. The website “Today” found out that and how it will change after the revision in the rate of ERUs.

To pay more have to employers

In Ukraine there are two list of privileged professions, there are miners, metallurgists, workers of the underground, artists, doctors and so on. They have the right to retire early. Like all Ukrainians, pensions are the Ukrainians receive from the Pension Fund, but to “earn” retirement often do not have time.

Now, Ukraine has a PAYG pension system. Working Ukrainians pay monthly contributions, the money is reallocated between existing pensioners. To “earn” the minimum pension with the minimum wage, currently pay dues to the joint system must at least 33 years. The minimum pension in Ukraine – 1312 UAH, and the minimum amount of single social contribution – 704 UAH. On average, Ukrainians living in retirement for 18 years. If all the time to receive the minimum pension, the government will have to spend 283 thousand hryvnias. However, the majority of Ukrainians, as noted in the Ministry of social policy, over a lifetime, the minimum pension is not earned, but still have a right to it.

Photo: Pixabay.com

In the current system of early retirement beneficiaries pay ordinary Ukrainians, the expert said RPR Taras Kozak. To reduce the load on the Pension Fund, the government has decided to increase the rate of ERUs for the beneficiaries. “First was an imperfect attempt to compensate for benefits due to the additional social contributions. After the decline of ERUs to a single rate of 22% injustice intensified. Early retirement-miners and ballet dancers receive contributions of ordinary citizens, and save on the contributions their employers”, – the expert writes on his page in the social network.

When and who retire on preferential terms:

  • List No. 1: 50 years with the working experience of 25 years for men and 20 for women
  • List No. 2: in 55 years, provided the experience of 30 years for men and 25 for women
  • Tractor: 55 years, subject to availability time of 30 years for men and 25 for women
  • Milkmaids: 55 years (at least 20 years experience)
  • The employee in textile industry: 55 years (20 years experience)
  • Public transport drivers: age 55 (men 30 years of service, women – 25)

So, after the pension reform, employers will have to pay for ERU officers on the first list – 37% of their salaries, and for the second list – 27%.

What will happen to a single Ust rate

The unified social payment for ordinary Ukrainians will not change. “Today, the single contribution rate is 22 percent. There have been suggestions of a return to greater rates of payment, however, the government made a decision on maintaining its size at the same level”, – the press service quoted Minister of social policy Andrei Reva.

In 2015, the ERU rate reached 41% of salary, but in January 2016 the interest rate reduced to 22%. The Pension Fund lost billions of hryvnia. In January 2015, the Fund received 11.9 billion UAH, in February 2016, the Ukrainians paid a total of 10.3 billion ERUs. Each month, the budget has lost about 1.5 billion hryvnia. The Cabinet of Ministers, declare, by reducing the tax burden on wages, entrepreneurs had the opportunity to raise wages. However, as told “Today” at that time the first Deputy Chairman of the Board of the Pension Fund of Ukraine Mykola Shambir (currently Deputy Minister of social policy), to raise the salaries of the businessmen did not.

“Employers could raise salaries in the amount of decrease in ESV (16.4 per cent). This did not happen. We have to be honest, we haven’t seen significant results from declining interest rates ERUs,” – said the official.

“Employers could raise salaries in the amount of decrease in ESV (16.4 per cent). This did not happen. We have to be honest, we haven’t seen significant results from declining interest rates ERUs,” – said the official.

If in Ukraine will launch the accumulative pension Fund, in addition to the ERUs, working Ukrainians will have to pay part of their salaries into the pension Fund. In one of the bills proposed the Ukrainians under the age of 35 years to pay 2 to 7% (each year the interest rate was to increase by one percentage point). However, at this point unknown, will launch in Ukraine, cumulative level in the near future, and how much it will cost Ukrainians.