How the Ukrainians will recalculate pension in 2017

The size of pension is affected by all three indicators: the average salary in the country, the size of their own salaries and length of service. In the formula of calculation of pension, in accordance with article 40 of the law “On compulsory pension insurance”, is counted as the ratio of own wage to the average for each month and the average salary in the country for three years.

For those who went on “the deserved rest” in 2007, the year before, the average over the three years of salary set at 1 197,91 hryvnia. After this figure did not change. Although the average salary in 2014, 2015 and 2016 reached 3764,4 hryvnia.

In October 2017 all legacy pensions recalculated taking into account the wages over the last three years. As a result, 5.6 million seniors payments will grow from 50 to more than 1,000 hryvnia. However, the Cabinet of Ministers proposes to modernize not just the average three years salary, but also to reduce the assessment ratio experience.

For example, the Ukrainian, who retired in 2007 and steadily earned 1.5 times more than the national average, at the moment, subject to the availability of 30 years of service receives 1312 UAH (the minimum pension). After recalculation of pensions, the same Ukrainians will receive 1693 hryvnia, that is, at 382 UAH more.

P = SN * KZ * KS

P – amount of pension
SN – salary (average salary over the three years prior to retirement)
KZ – coefficient of wages (the ratio of his salary to the national average)
COP – coefficient of insurance (each year is multiplied by 1.35% and after the reform – 1%)

This approach, says senior researcher of the Institute of demography and social studies Lydia Tkachenko, profitable only for those who have long been retired. Those who retire in 2017, before determined the amount of the pension based on average salary over the last three years. But taking into account the coefficient estimates of experience of 1.35, and in the new formula, the government proposes to use the coefficient of 1.

For example, before the law came into force, the Ukrainian with 25 years of insurance experience, which has consistently received a salary two times higher than the average, could this year to receive pension at 2540 hryvnia. If the law is adopted, the same Ukrainian can claim a pension only in 1882, the hryvnia. In fact, all the future pensioners want a third to cut payments. This will allow the Pension Fund to save billions of hryvnia.