Ukraine passes pension reform package

business in Ukraine: Ukraine passes pension reform package

The #Ukrainian parliament – the #Verkhovna #Rada – has recently passed the #legislation to #reform the country’s criticized #pension #system. It is an #important and long #awaited step to comply with the #requirements under the #multi-billion dollar #financial #support program of the International Monetary Fund (#IMF).

Visit our website if you are interested in the #Ukrainian_economy or #doing_business in Ukraine.

On 3 October 2017, Ukraine voted for a comprehensive pension reform. The Verkhovna Rada passed the legislation to reform the Ukrainian pension system, which is an important and long awaited step to comply with the requirements under the USD 17.5 billion support program of the International Monetary Fund (IMF). Before the vote on Tuesday, the Ukrainian Prime Minister Volodymyr Groysman called on members of parliament to take a “historic decision”, which is a way to “fair pensions” for about 9 million Ukrainian retirees.

Drafted by the Ukrainian government and promoted by the Western supporters of the country (the World Bank and the International Monetary Fund), the new law aims to prevent early retirement and gradually increase scant monthly pensions. In addition, Ukraine’s pension reform will allow the disbursement of another IMF tranche of USD 1.9 billion.

The figures show that the Ukrainians would have to work more years to claim their pension benefits so that the pension system is sustainable on the long run. The pension reform is designed to prevent early retirement and increase the number of contribution years. For example, at the age of 60, one is entitled to a retirement pension after 25 contribution years. The minimum number of contribution years is to be increased annually by one year and will amount to 35 years in 2028. This measure is adopted to prevent employees from quitting their job at the age of 60.

The new pension package took effect on 11 October 2017. According to the Ukrainian Pension Fund, nine million retirees will receive new increased pensions starting from 1 October 2017. After the pension reform in Ukraine, the minimum pension is to be increased by 11% in 2017 – to UAH 1,452 (approx. EUR 46). At the same time, by changing the pension system, the government expects to eliminate the deficit in the state pension fund amounting to approx. EUR 4.2 billion, which represents 11% of the gross domestic product. However, there shall be no increase in the pension age.

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