Pension reform: challenges and prospects


For 25 years Ukraine has been trying to implement a pension reform. However, the result is not so comforting.

The implementation of reform is complicated by a number of objective and subjective factors, such as demographic situation, high level of economy shadowing, budget imbalances and political populism.

Winning the electoral loyalty of pensioners has become a trend. For instance, in the period from 2002 to 2010 the minimum amount of pensions increased by 9 times in real terms, while the average salary only by 3.4 times. Another problem is the existence of privileged pensions and early retirement benefits for certain groups of the population.

The difficult demographic situation in Ukraine also greatly complicates the development and implementation of pension reform. One of the main demographic problems in Ukraine is the very high premature mortality and, consequently, one of the lowest life expectancy rates in Europe. Another dangerous trend is the aging of the population.

Thus, the development of the pension reform has been taking place in rather difficult and tense conditions. Nevertheless in May 2017, the Cabinet of Ministers, under pressure from the IMF, approved a draft of a long-awaited pension reform.

In general, the draft of the reform is focused on reducing the chronic deficit of the Pension Fund, modernizing and increasing the efficiency of the principle of solidarity in the pension system, i.a. due to combination with the elements of the accumulation system of the mandatory state pension.

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