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Pension reform started

Apr 12, 2010

Pension system of Ukraine is completely outdated, and must be reformed urgently. Besides, Ukrainian citizens must have access to alternative pension systems. The participants of a round table conference, made by the Ukrainian Union of Scientists-Economists together with representatives of a number of industrial, financial and insurance companies came to this unanimous decision.

To make sure that the round table conference will not be a mere formality, a workgroup for studying the already present pension system reform suggestions, its further development and active implementation has been created from the participants of the event.

According to Alexander Kenduhov, the Chairman of the Ukrainian Union of Scientists-Economists, Doctor of Economics, the mechanism of the pension fund formation, which is being used currently, and also other social funds principles of operation are extremely imperfect and indeed are unfair. Mr. Kenduhov reminded that pensions of some citizens exceed the amount of the minimum pensions, received by most of our fellow countrymen not in two-three times, but in 100 times. Such a differentiation is unacceptable. He finds a solution of this problem in a creation of a “personal pension fund” for each citizen of Ukraine. The fund will work in the following way: a percentage from the salary will be transferred to a personal account. But, since the wage amount is different depending on a person, the amount of payments to the account will also be different. Those who work more – will have more money on their pension. In case of a person’s death before the retirement the money from the personal account will be paid to his/her relatives, as an inheritance.

Sergey Klenin, Asset management director of ALTERA FINANCE Investment Group suggested helping to improve the reform and gain time, compensating the lack of attention to the reform correct functioning. One must understand the problems depth and do ones best in order to solve it. According to Sergey Kelnin, some work has already been done in this area. We just need to improve something and to start the reform mechanism urgently. The old pension system does not work anymore. As a current alternative we suggest participation in private pension funds, which are a European pension system model.

The Head of the Private Pension department of ALTERA FINANCE IG Elvira Shramko reminded that the pension fund (PF) of Ukraine is a separate financial-banking system and is not a part of the national budget of Ukraine. This fund is not able to pay pensions in full currently. That is why the state must leave a legislative option to the employers: to pay compulsory insurance contributions into the joint system of the state PF or personally to private PFs.

The round table conference Does Ukraine need pension system and insurance reforms? was held on the 7th of April in Donetsk. Scientists-economists took part in the event, together with representatives of a number of companies and public organizations, who work with private pension systems, insurance companies representatives and others.

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