Pensions are changing in Ukraine. Who will be affected by the innovations
29 January 2025 18:32
ANALYSIS
This year, Ukraine will undergo a pension reform initiated at the request of international partners, including the IMF. Ukrainians will face innovations, which were recently announced at a press conference by the Minister of Social Policy Oksana Zholnovych. What drastic changes are planned, "Komersant Ukrainian" found out.
According to the minister, Ukraine plans to reduce pensions for officials and change the procedure for their calculation.
“Regarding disability pensions for officials, we have already registered a law that stipulates that all disability pensions are calculated according to the general rule,”
– said the head of the department.
The draft law, which will be submitted to the Verkhovna Rada, unifies approaches to calculating disability benefits regardless of status. According to the official, this is done to ensure fairness in the general system of special pensions, when certain categories of pensioners retire faster and are calculated according to higher parameters than the general rule.
“Accordingly, in the law on the state budget, as well as in a special resolution, we have limited the coefficients for all pensions that amount to more than UAH 23 thousand,”
– Oksana Zholnovych added.
Shake up the rich pensioners
First of all, this should affect prosecutors, judges and other officials, as the head of the Ministry of Social Policy noted. They are the ones who receive very high pensions, and there are about 17 thousand of them. But the new rules will not apply to combatants, for whom support will remain separate.
And, as emphasized by the Ministry of Social Policy, the state budget for 2025 approved a rule on the application in 2025 of restrictive coefficients to pensions that are 4 or more times higher than the average pension in the country, or 10 subsistence minimums for disabled people. So to speak, for the sake of fairness and cost savings.
We are talking about limiting pensions to 60, 80, or even 100 thousand hryvnias or more. For example, according to the Pension Fund, the average pension for judges has increased to UAH 107,000 per month over the past 5 years. In 2020, the average amount was UAH 45,874. The mechanism will work in such a way that the higher the pension, the higher the coefficient will be applied. However, this will apply only to the part of the payment that is not the insurance part of the pension, but an additional payment from the state for work in certain security or other structures. We are talking about bonuses, raises, additional pensions, targeted financial assistance, pensions for special services to Ukraine, indexation and other pension supplements established by law.
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Pure populism?
But, according to former Social Policy Minister Andriy Reva, there will be no cuts in pensions – this is pure populism. Prosecutors’ pensions can be canceled in the same manner as they were granted by law.
“It was not the Pension Fund that appointed them, but the court, which acted within the framework of the current law. Therefore, only the Supreme Court can cancel the payments, not through draft laws. But the law does not have retroactive effect. That is, those who receive large pensions by court decision will continue to receive them, no matter what bills are passed and no matter what Zholnovych says,”
– says Andriy Reva in a commentary to .
Moreover, as the former minister notes, the new savings will lead to people receiving a penny.
“Here they are saying that there will be a basic pension – one third of the minimum wage including taxes. Today, the minimum pension is UAH 3200 of the minimum wage, and they want to make it UAH 1800. Now, even at the subsistence level, it is UAH 2360. And they also want to add insurance payments, so supposedly it should be much higher than it is now. But if there is no money, the coefficient will decrease and this will lead to the fact that the pension will decrease to the minimum level,”
– explains Andriy Reva.
Saving for retirement
But the most interesting statement made by the Minister of Social Policy at the press conference was that the pension reform will provide for a mandatory 9% of salary to be deducted from the funded pension, Reva notes. This amount of payroll deductions will allow people to receive 20% of their average lifetime salary in retirement. Another 20% will come from the solidarity system, which will result in a total replacement rate of 40%, while today it is 28%. At the same time, the minister emphasized that more than 9% can be deducted to increase the future pension.
According to Reva, this is the whole point – to extend the funded pension system that MP Tretiakova has been running with for six years under the guise of reform.
“It’s called ‘we’re going to collect money now, and then in a few years this money will have to be transferred to private insurance companies. This is a corruption scheme. This is where their plans to increase the tax by 9% were really voiced, which they later tried to refute,”
– says Reva.
As a reminder, in early January, Prime Minister Denys Shmyhal said that legislation on the funded pension system is planned to be adopted in 2025. And Minister of Social Policy Zholnovych warned that starting from July this year, Ukrainians will be paid pensions according to a new formula:
- Basic pension – 30% of the minimum wage (in 2025 it will be UAH 1848);
- Insurance pension – will depend on how many years a person has worked, how much he or she has earned and paid contributions. For example, if a person has 35 years of work experience, his or her pension will be UAH 6,140 instead of UAH 4,745, as it was before. However, it is noted that due to the lack of funds in the budget, a special coefficient may be introduced that will reduce new payments to the level of the old ones.
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Author: Alla Dunina
