The current solidarity system, under which pensions are financed by the contributions of working citizens, does not guarantee a sufficient level of pension payments for many retirees.
After the end of the war in Ukraine, a "second pension" system based on mandatory savings will be implemented. This will provide citizens with additional income in retirement, enhancing their financial security and strengthening the country’s economic stability. This was announced by the Minister of Social Policy, Oksana Zholnovych, in a comment to the publication "Novyny Life".
The introduction of the second tier of the pension system involves creating a mandatory accumulative system that will complement the existing solidarity pension system. This reform has been on the government’s agenda for several years. The need for such changes is evident: the current solidarity system, under which pensions are paid from contributions by working citizens, does not guarantee a sufficient level of payments for many retirees.
The reason for this is the demographic crisis, where the number of retirees significantly exceeds the number of working individuals. Therefore, the Government of Ukraine is developing measures aimed at ensuring a decent pension income for future generations.
The accumulative pension system represents a mechanism by which each citizen is required to set aside a portion of their salary into a special account, and these funds are then invested to generate income in the future. In other words, each worker independently forms part of their pension by making regular contributions throughout their working life. Such a system successfully operates in many countries around the world and has already proven its effectiveness, especially in European and Asian states.
Oksana Zholnovych reported that the government has already completed the coordination of legislation at the working level for the introduction of the second tier of the pension system. She noted that the solidarity system will continue to operate, but mandatory accumulative pensions will be added to it, providing retirees with additional income. The introduction of the accumulative system is planned immediately after the end of the war. According to the minister, this will help accelerate the stabilization of the country’s economy and provide citizens with additional guarantees for the future.
Zholnovych noted that a mandatory accumulative system will be introduced. Legislation on this issue is already coordinated at the working level. If the solidarity system begins operating from July next year, then the implementation of the mandatory accumulative system will start immediately after the end of the war. The main advantages of the new tier of the pension system:
diversification of pension income: citizens will have access to two sources of pension payments – the solidarity and accumulative systems; financial independence in old age: the accumulative system will allow accumulating funds in one’s own account, providing greater confidence in the future; economic stability of the country: accumulated funds can be invested in the internal economy, contributing to the growth and development of the country after the war; less dependence on the state budget: with a decrease in the working population, it will be easier for the state to finance pensions from accumulated funds, reducing the burden on the state pension system.However, alongside the positive aspects, there are also certain risks and challenges. Firstly, it is necessary to ensure the creation of a reliable infrastructure for managing accumulative funds, which implies a high level of transparency, effective state regulation, and competent investment of funds. Secondly, the success of the accumulative system is directly linked to citizens’ trust in the organizations managing their funds.