Ukraine is planning to introduce a new pension reform to eliminate inequalities between pensions. Read this article to find out what it is about, what it proposes and what changes can be expected

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The Ministry of Social Policy of Ukraine has unveiled a draft of a new pension reform. According to the idea, it will help to introduce basic pensions worth 30% of the minimum wage, as well as a system of points for insurance premiums. More details about this are described below.

What is the essence of the new pension reform?

The government expects that the draft law will increase payments for 80% of pensioners and eliminate inequalities between the amounts of pensions granted in different years.

In addition, it is expected to simplify the accounting of pension rights and the understanding of the amount of one's future pension.

As stated in the explanatory note to the draft law, it is proposed to eliminate imbalances in the PAYG pension system, introduce unified approaches to pension calculation, and ensure a clear correlation between the amount of the insurance contribution paid and the amount of the pension.

In particular, it is planned to use information on the amount of insurance contributions paid instead of information on the salary (income) from which the insurance contribution was paid to calculate the amount of pension.

The amount of the pay-as-you-go pension will not be subject to a maximum limit.

It also proposes to introduce a basic pension and replace the current cumbersome and non-transparent system of numerous non-status payments and ‘extras’.

At the same time, the draft law proposes to exclude from the concept of ‘pension’ all allowances and other payments that have a status character or other privileges (established by other laws) and are paid from the state budget.

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What is the essence of the basic pension and points?

As you know, the old-age pension consists of the basic part of the old-age pension and the insurance part of the old-age pension.

The amount of the basic part of the old-age pension is 30% of the minimum wage for the current year, reduced by the amount of taxes and other mandatory payments.

The amount of the insurance part of the pension is calculated as a derivative of the amount of contributions paid by the person throughout the entire period of employment.

The value of one point is determined by the formula, taking into account the average salary from which insurance contributions were paid for the previous year, and 4200 - the average number of points that a person acquires over 35 years of insurance experience, subject to payment of contributions.

It is noted that the value of one point is determined by the Cabinet of Ministers and approved annually from 1 March.

What is meant by pension indexation?

The draft law proposes to change the approach to pension recalculation. The growth of pensions will be in line with the processes taking place in the economy: if wages increase (the amount of contribution revenues increases), pensions will increase, and if wage growth slows down, pensions will slow down.

In addition, the approaches to pension recalculation for people who have continued to work in retirement are changing. For working pensioners, pensions will be recalculated automatically every year. The amount of pension will be increased based on the amount of service.

As for special pensions, the government proposes to make them separate payments - state social supplements to pension recipients. All existing surcharges, raises, additional pensions, allowances and other pension supplements that are of a conditional status or established for certain merits or work characteristics (not covered by insurance) will be preserved and consolidated in a single law (new version of the law) ‘On Pensions for Special Merit’).

What should pensioners with a minimum length of service expect?

The new pension reform should extend pension coverage to people who have reached the age of 65 but do not have sufficient insurance record, although they have paid quite large amounts of insurance contributions.

It is proposed to grant the right to an old-age pension regardless of the available insurance period (currently the minimum requirement is 15 years) to persons who have reached the age of 65, provided that they have paid contributions in the amount equivalent to the amount of contributions for 30 years of service from the minimum wage.

We remind you! Ukraine's international pension agreements cover nine European countries where Ukrainians can receive payments on special terms. We told you which countries these are and which citizens need to provide the Pension Fund with an identification document to continue receiving pensions.

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