The value of the pension in Ukraine and other countries

In Ukraine next month will consider in the second reading a draft pension reform. Says Minister sotspolitiki Andrey Reva, the current system is in a “critical condition” – the deficit of the Pension Fund (PF) exceeded 140 billion, and the majority of Ukrainians receive the minimum pension. The website “Today” figured out the value of the pension in different countries and how it can change the pension system of Ukraine.

The “cost” of pensions

A few years ago, the average from each paycheck Ukrainians “retirement” gave 37%. In 2016, the rate of single social contribution (ERU, 82.5% of which goes to the Pension Fund) reduced to 22% of salary. As recognized in the Ministry of social policy and the Pension Fund, this decision led to a sharp rise in the deficit. If in 2015 the pension is not enough around 80 billion already in 2016 from the state Treasury had to compensate the deficit of 145 billion. To introduce in Ukraine the funded level of the pension system, additionally, salaries have every month to charge from 3 to 7%, according to the draft bill launch of the second pillar of the pension system.

So, at the moment, Ukrainians give “retired” about 22% of their salary. A minimum contribution of PF – 704 of the hryvnia, and the minimum pension – 1312 hryvnia. The main problem of the current system – the ratio of taxpayers to pensioners – one-to-one, many employers pay a single contribution from the minimum wage.

In Ukraine on 26 million working, officially, there are 16 million, and to pay ESV – only 10.5 million. While pensions in Ukraine receive nearly 12 million people. Approximately 10 employees comprise 11 pensioners. Additionally, a large part of the employers taxes are paid only a minimal salary and the remaining amount is paid to employees in “envelopes”. As a result, the deficit of PF – 140 billion, and 70% of Ukrainians are “retired” live on a minimum pension. This is about 50% of the cost of the consumer basket. That is, this money is not enough even for the minimum set of products and goods.

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At the same time in Belarus the pension is “worth” 29% of salary, and the retirement age from next year men will be 63 years and for women 58 years old. Due to demographic situation (the number of elderly citizens is growing, and the number of adequately – reduced), the authorities had to reconsider the age of retirement, however, the gap between the retirement ages of men and women in five years have saved. In Ukraine, since 2011 the gap is narrowing – in 2021, and women and men will get a “deserved rest,” not before 60 years.

The minimum pension was UAH 2238 (or a bit more than 170 Belarusian rubles), and minimum contribution “retirement” – 1010 UAH. According to the National statistics Committee of Belarus, contain 10 employees, 5 retirees. The shortage appeared in the country only in 2014, thanks to the increase in the retirement age it is planned to liquidate completely in 2022.

In Poland pensioners receive two pensions from the solidarity and savings levels. Such a system was implemented in the late 90s.”the Cost” of pensions of 19.52% of salary. 12% goes to the joint level, and 7.5% for individual retirement accounts. The minimum pension in Poland – more than seven thousand (1,000 zlotys). That’s five times more than in Ukraine, but several times less than, for example, in France.

In Poland the retirement age for men is 65 and for women 60 years. A few years ago, the government planned to raise the retirement age to 67 years, however, under pressure from the poles the decision was canceled.

Almost all Polish pensioners over 75 years of age enjoy the benefits – free medicine, subsidised travel on public transport. For the retirement pension men need to work at least 20 years and women 15. Note, in Ukraine to receive the pension is enough to have 15 years of experience. However, in the framework of pension reform, these Ukrainians are offered to increase the retirement age. Those who earn only 15 years, will retire only at 65 years.

In the USA the retirement age is 67 years. In addition, for pension only 10 years to pay 15% of their salary to the Pension Fund. American pension system appeared in 1935 when Franklin Roosevelt signed the law “On social security” (Social Security Act). The average pension – $ 1,500 (39 thousand hryvnia at the current exchange rate of the hryvnia).

As I propose to change the pension system in Ukraine

Currently registered in the Parliament several draft laws which will reform the current system. First developed by the Cabinet and agreed with the IMF, the second document authored by 59 MPs about the launch of the funded pillar of the pension system.


To revise the retirement age. The opinion of experts on whether to revise the retirement age, divided. So, the chief demographer of the country, Ella Libanova believes that such a move is not currently justified by the demographic situation in the country. “If we have a retirement age of 60 years, our men have the chance to live in retirement for almost 15 years. If we retirement age will raise (men – approx.ed.) to 65 years, they will remain to live only 12 years. It is too little, if we assume that 40 years, they work somewhere and pay the fees, that’s just cruel”, says Ella Libanova.

At the same time, senior researcher of the Institute of demography and social studies, expert in the field of pensions Lydia Tkachenko sure that the retirement age in Ukraine to raise needed. “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, we can say that direct limits in international practice there. Low retirement age is not accompanied by prolonged duration of life. People who live to 60 years, with the same probability will live up to 63 years,” explains Lydia Tkachenko.

Enter “funded” pensions. Only the joint level, which is now in effect in Ukraine, to ensure the highest pensions are not, the expert believes Galina Tretyakov. So, the replacement rate of the salary (portion of salary on which retirees can qualify for retirement) will be reduced. According to the standards of the International labor organization, the pension should be at least 40% of salary. At the moment, in Ukraine the average salary is about 7000 hryvnia, and the average pension for the year will reach only 28.5% of that amount – 2000 UAH.

Most experts agree – start the pension in Ukraine is necessary. However, in this solution, there are a lot of risks. In order to accumulation not “ate” inflation, they need to invest in the economy and multiply. In many countries, accumulated in retirement funds invest in the stock market. In Ukraine, this market is practically not working.

Increase the minimum insurance period required for obtaining pension. Strahovoi experience of Ukrainians is reduced. If in the 90s the average length of retirees has reached 34 years now – only 30 years old. If you increase the requirements for length of service, the Ukrainians will have an incentive to officially take shape and last longer.

Pick up a “special right” to retire. Senior expert of the World Bank Alexei Sluchinski notes: another issue of the Ukrainian pension system: sorpresa individual pensioners (veterans, victims of Chernobyl, etc.). Thus, according to the expert, after 15 years of such categories simply will not. Currently up to 30% of the cost of PF – like sorpresa and “dotiki” to the minimum pension for those who have not gained the required work experience. Experts consider several options: to cancel the “special rights” or wait until the number of beneficiaries will be reduced “by natural causes”.


To tighten the requirements for receiving a pension. The Cabinet of Ministers in the framework of the pension reform proposes to gradually raise the requirements for obtaining a pension at 60 years. If the document is accepted, next year “in time” on a holiday will be the Ukrainians, who are at least 25 years of service. Every year the experience requirements will increase for 12 months. Thus, in 2028 to retire at 60 will be released only 55% of 60-year-old – those who earn at least 35 years of service.

To reduce the size of the pensions that will accrue after the reform. At the moment the ratio estimate one year of experience – of 1.35%. This figure appears in the formula for calculating pensions. In the framework of the reform it is planned to reduce by 25% to 1%. Proportionally reduced pension, which will be appointed after the reform.

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To recalculate the pensions. A large part of pensions calculated up to 2007. During this time, the average country wage obsolete. Prime Minister Volodymyr Groysman offers to convert the already granted pension taking into account the fact that the size of the average country salary for three years (this figure takes into account the Pension Fund) has increased almost three times. In this case the pension will be recalculated with a lower coefficient estimates of experience. The result is 5.6 million Ukrainians receive a pension from 50 to more than 1,000 hryvnia.

To reduce the number of beneficiaries. The reform proposes to repeal all special pensions – scientists, journalists, teachers, doctors, etc. the Exception will only leave for judges, and the military (for which there are special rules). Such a rule would cause the retirement on superannuation will no longer be a size, for example, the academic pension compares to “normal” pensions.