Pension reform: how much money will be able to accumulate the Ukrainians

The funded system is introduced from 2019.

Pension life of Ukrainians again planned the news. While the Cabinet is developing rules for the operation of a funded system of pension insurance, Journalists have calculated how much they can save the average Ukrainian over 35 years (see infographic) and learn from the experts how this will work.

The percentage

According to the document, the Ukrainians under the age of 35 will be required to save for retirement already from 2019. The first year will be charged 2% of salary, but the contribution will increase by 1% per year until it reaches 7%. In the near future the government will determine who and how will control the system and also generate the rules and requirements of the program.

The Executive Director of the Economic discussion club Oleg Pendzin reminded that there are three levels of the pension system. The first — a joint system, there goes our mandatory unified social contribution of 22%. The second — which will be introduced in 2019 — a mandatory funded system. The third storage system, but voluntary.

“In many countries operate all three systems together,” — said the expert. According to him, a mandatory fee of 22% in the joint system will remain, and it will be added, and contribution to cumulative 7 per cent. In the end, Ukrainians will pay for their future retirement 29% of salary. According to group managing Director ICU Gregory Ovcharenko, the future savings account open in the pension funds.

“By law, pension plans, state insurance, within the first 2 years after the launch of a funded system will operate a state Fund. And then the participant will be able to translate savings into non — state Fund,” said Ovcharenko.

In turn, the Minister of social policy Andrei Reva believes that the pension system needs to be initially non-state, and the Ukrainians should be able to choose their own Fund.

“Fee must pay the employee from your earnings, because it is his money he needs to accumulate”, he added.

Need protection

Oleg Pendzin emphasizes that the cumulative system work well only where a stable economy, and therefore need to protect the accumulated funds from inflation.

“Accumulated should not depreciate. Consider inflation protection and a method for its enhancement. But the question is still open,” he says.

Grigoriy Ovcharenko, the same calm: “In terms of have a point about the development of a mechanism for the protection of savings, that is the question to finalize. In addition, there are examples of countries where it is guaranteed the safety of savings and the minimum yield”. He noted that the cumulative level is private property, belonging to the party, but because it can be inherited.

But Pendzin believes that the accumulated asset not to leave: “This can only be funded in a voluntary and a mandatory system is unlikely to provide a Testament contributions.” In his opinion, the government has several options for future payout of accumulated: it is possible to determine the amount of monthly surcharges to pensions, and can afford a lump sum to withdraw these funds. Ovcharenko told that the law involves buying an annuity on retirement, which provides for periodical payments depending on the accumulated amount.

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