Accumulative pension in 2019 in Ukraine
So, as part of a multi-stage project codenamed “Pension Reform” from 2019, the Cabinet of Ministers threatens to bestow an intriguing innovation on everyone like the funded pension system.
What does this mean for the state as a whole, and for ordinary Ukrainians who are inexorably aging under the laws of nature and slowly but surely crawling towards their own retirement age, whatever one may say? We will talk about this today.
By the end of this year, our Government has committed itself to prepare and submit to the parliament several bills that will regulate accumulative pension insurance.
The idea was outlined in the Pension Reform approved in mid-autumn 2017, and since then the Cabinet of Ministers has continued to move according to the planned plan for the implementation of this system. According to the information from him, the savings system will have to earn directly on January 1, 2019, and all citizens who fall under the criteria of compulsory pension insurance will voluntarily-forcibly participate in it.
If less than ten years are left until retirement, you can refuse to transfer yourself to the savings system at all. Actual retirees in the savings fund to pay contributions are not eligible in principle.
For the storage of these funds in the years 2019-2020 will use the state funds. Then, at will, each participant of the program will be able to transfer their accounts to non-state structures.
True, the final decision on the place of storage has not yet been made - there are opinions that Ukrainians should initially be able to choose one or another fund, yes, and the whole system should be removed from the scope of state supervision.
Accumulative pension system
To begin with, we will make a reservation that in the country (although not for everyone - see above), three pension savings systems will have to function simultaneously. Moreover, the Ukrainians will be able to choose independently, remain with them at the usual single social status of 22% with the mandatory funded part of 2-7%, or add to it also voluntary accumulative contributions (this is if they were born before 1985).
Why is the interest rate floating? Initially, they thought that they would introduce obligatory payments for all citizens under 35 in the first year at a rate of 2%, next year they would introduce 3 percent, etc., increasing one each year until the figure crawls to seven.
In the end, it turns out that the future pension will bite off the salary pie of everyone and everyone (except those specified in the law) 29% of the hard-earned money every month.
Ideally, it means that every citizen will have his own account where he will “stock up” his pension, and he can manage it at his own discretion — at least once he can withdraw everything when an insured event occurs — that is, of retirement age — at least he can assign himself uniform or uneven lifetime payments. And the contributions forming it will be taken solely from earnings.
It is also stated that, unlike the old system, this money will always be the property of the future retiree himself, so he can leave his account as a legacy to someone. Although, the last point is still debated: some believe that it is possible to inherit only the voluntary part, and the mandatory one simply cannot physically implement this mechanism.
Pension system in other countries
In Germany, France and Finland, for example, the distribution system works, that is, now the current pensioners are paid off by those who are currently workingand the sizes are formed according to the fulfilled and other characteristics. Then they will be fed by the next generation, etc.
In the UK, there is a very complex pension system consisting of a base minimum from the state, as well as labor payments from the national insurance system based on length of service and earnings.
What we are trying to introduce is most reminiscent of the American system - in this country there are a lot of both state and federal pension programs, not counting private funds, and everyone has the right to receive at least all three pensions at once - and from the state, and private collective from work and from personal retirement account.
What should Ukrainians expect?
Experts believe that the idea of cumulative non-state pensions is, of course, a good one - it is aimed at increasing the independence of a person from the state, at getting him the opportunity to independently manage his savings and decide how to ensure his own old age.
To be honest, it has been working for us for a long time, but far from as large as it is planned to do - only within the framework of private pension funds.But, at the same time, the same experts caution that the scheme is reasonable only in countries with a healthy economy. In our country, everything must be consumed by inflation and the natural depreciation of money.
At the same time, as always, the system is introduced - but to protect it from these troubles, no one has yet undertaken anything. Of course, there are voices in the Government that it is necessary not only to secure the growth rate of these personal savings accounts of citizens by the annual inflation rate, but even to introduce a certain percentage of the contribution in order to increase it in a logical way with time.
Since the 2019th is the election year, it is possible that even such populist measures will be introduced, such as ensuring minimum profitability.
True, even after these reports, many still have the same clue when “funded pension” is the word, because everyone has heard, for example, the sensational story of freezing these accounts in neighboring Russia, where they tried to implant a similar scheme in large numbers in 2002 the time of the pension reform, however, with the obligation to invest the funded part.
And now, for the fifth time, how all payments from these accounts are “safely” frozen by the decision of the Duma, therefore, people cannot receive some of their personal money,since the accounts are controlled completely by the state.
We have, of course, the situation with the lack of external lending and investment in the country is not so stalemate that it is so frank to rob its own citizens, but Ukrainians are rightly afraid that if the accumulation funds are in the office of the Government, it’s not good to expect.
Although, on the other hand, those who have lived with us at least for a while understand that, in principle, there is even less trust for private owners ...
If you look at the issue of the introduction of funded pensions in general, in principle, no simple man in the street can get any complaints against them.
Of course, given the fact that by the end of 2018, the Government will still have time to develop and promote at the legislative level a mechanism for protecting deposits, as well as regulate all schemes for their creation and use.