Will funded pensions become a reality in Ukraine - an expert answers

Will funded pensions become a reality in Ukraine - an expert answers

Kyiv  •  UNN

 • 133660 views

Ukraine plans to introduce an additional funded pension system in 2026. According to the Ministry of Social Policy, this could increase pension payments by 15-20% with mandatory accumulation.

Ukraine is planning to introduce a funded pension system that will become an additional source of payments alongside the current pay-as-you-go model. In a commentary to UNN journalist , Andriy Novak, Chairman of the Committee of Economists of Ukraine, said that such accounts could become an important tool for the country's financial stability, but there is one catch.

The fact is that the funded pension system is introduced as an additional system to the one that already exists. It does not replace it, but complements it. In fact, this is the second pension purse that every Ukrainian will be able to have at retirement through the funded system

- says the expert.

Novak says that the existing solidarity pension system remains and will serve as a "basic pension" accrued by the state, while the accumulation part will directly depend on the salary a person had.

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"It is not yet fully clear how this will be charged, whether it is optional or mandatory," he added.

The expert explained that the best pension system has 3 levels: solidarity (which works in Ukraine), mandatory funded and voluntary funded. 

A mandatory funded plan sets a certain percentage of the salary that the employer deducts from the employee's pension account with each payment. In turn, a person can withdraw these funds only at retirement.

All this time, when a person is working, the bank accrues interest on pension deposits as on a regular deposit, and when the employee retires, he or she receives a significant amount. For 30 years of employment, the bank accrues quite good interest

- Novak said.

According to the economist, the Ministry of Social Policy's forecast that the pension reform will increase pensions by 15-20% is quite realistic if it is a mandatory funded system. 

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The details remain: what kind of accumulation system will be in place, what percentage of the salary will be deducted, whether there will be any gradation or whether the percentage will be the same for everyone

- He said.

The expert says that in general, Ukraine needs not only state pension funds but also private ones, due to the issue of Ukrainians' trust in investments or savings in financial institutions:

"Because we went through a 'bank run' when Valeria Gontareva was  the head of the National Bank and more than 100 banks closed, Ukrainians' trust in financial institutions was undermined. This is more of a political issue," Novak said.

When asked by a journalist how strong the hryvnia is in order to save in the long term, Novak answered:

"The existence of accumulative pension accounts forms a large investment fund for the financial system, as these are long-term accounts. They are also not only investment funds, but also an element of maintaining the stability of the national currency.

Recall 

 The Ministry of Social Policy plans to launch a funded pension system in 2026. The legislative framework and IT system for the state accumulation fund are currently being developed.