In each country, a retirement age is mandatory - a certain number of years, upon reaching which a man or woman has the full right to leave work and apply for old-age pension payments.
Pension reform has been ongoing in our country for several years in a row. Its main task for the authorities is not only to optimize pension costs, but also to increase the total amount of payments. At the moment, it is becoming clear that our authorities will be able to achieve their goal only if they increase the age of service. If you carefully read the latest news about the pension reform 2021, it becomes quite obvious that both women and men will work even more from the new year.
These and other changes to the pension legislation of Ukraine in 2019 caused a considerable wave of indignation from ordinary citizens. The established standards do not correspond in any way to the real situation, and the retirement age table is meaningless. Those age standards that are common in Europe do not yet suit our Ukraine.
What is the essence of the 2019 pension reform?
To begin with, it is worth remembering those important changes that were introduced quite recently (the Pension Reform project in Ukraine for the years 2021 and 2018) and became the basis for further manipulations with the retirement age bar. The fact is that not so long ago, within the framework of this very pension reform, there was already talk about increasing the level.
One of the IMF's requirements before authorizing the next tranche for Ukraine was to increase the retirement age. The Ukrainian authorities agreed to this, but the statistics on the average life expectancy of Ukrainians turned out to be very sad. If you constantly increase the age of a pensioner to the figures recommended by foreign partners, then most of them simply will not live to see this important event (retirement). In Ukrainian realities, radical reform of the pension sector turned out to be impossible. This forced the government to resort to another step: gradually increase the insurance period, which is what the pension reform 2021 is closely “doing.”
From 2021, all persons who (as before) have reached the age of 60, but who already have an insurance period (the period during which they paid contributions to the relevant fund) of at least 25 years, will be able to go on vacation.
At the end of 2021, PFU was barely able to “extend” its own obligations to pensioners. According to the approved budget of the Fund for 2021, it was planned to collect 214 billion UAH of its own income (taking into account the balance of funds at the beginning of the year), of which 208.2 billion UAH were revenues from the payment of a single social contribution. Despite the fact that in 2021 PFU did not fulfill the plan for its own income, in 2019 the government increased expectations for these revenues by another 16.3 billion UAH (up to 230.6 billion UAH).
It is already obvious that costs will increase. In 2021, many will see pension recalculation. As of January 1, there were 11,400,000 pensioners in Ukraine. According to PFU data, the average old-age pension is 2645 UAH. But only 24.3% of people have an average pension, and 52% of pensioners receive a pension of up to 2000 UAH.
In March of this year, pensions should be indexed in accordance with average wages and inflation. And later (from April 1), the Pension Fund authorities must automatically recalculate pensions in accordance with the insurance period accumulated after retirement.
In addition, the law “On Compulsory State Pension Insurance” contains several mechanisms for pension indexation:
- annual indexation (recalculation by increasing the average salary);
- recalculation due to an increase in the cost of living;
- recalculation for working pensioners (based on Part 4 of Article 42 of the Law).
The above indexations are a vital necessity for people and their right, which must be implemented according to the legislation of Ukraine.
So, the government must, firstly, determine the real budget indicators of the Fund during the official approval of the PFU budget, assess the reality of revenues, and, accordingly, planning. The second task of the government is more global, and it had to fulfill it when carrying out pension reform. The fact that a big crisis awaits the solidarity pension system became obvious not a year or two years ago. And the pension reform in Ukraine 2021 not only does not solve, but also deepens this problem.
It seems that real reform can no longer be expected during the activity of this government. In the current situation, a real reform could be the introduction of a second funded level of pension insurance. Own savings, as an instrument of investment activity, are the basis for the well-being of pensioners in all developed countries. Changing the architecture of the pension system of Ukraine will have a positive impact not only on each individual citizen, but also on the state economy, because according to experts, only in the first year of implementation it will already be able to bring in about 20 billion UAH.
But the Government is not looking for “difficult ways” and simply takes additional money to maintain the solidarity system from the pockets of taxpayers.
Tax on pensions in Ukraine
The pension system in Ukraine, like in many countries, is in crisis. The condition is aggravated by political, economic and social instability. Therefore, the government of the country is taking measures to improve the condition of the most vulnerable part of the population - disabled pensioners, and at the beginning of June 2016 this finally brought fresh results.
On the amount of pension payments of Ukrainian pensioners
According to statistics, the minimum pension in Ukraine was until 05/01/16. — 1074 hryvnia (2824 rubles), from 05/01/16. the pension is indexed to 1130 hryvnia (2971), from 12/01/16. should increase to 1,208 hryvnia (3,177).
When calculating the pension, the Pension Fund of Ukraine takes into account:
- General experience.
- The period of work in enterprises with hazardous working conditions.
- Availability of rights to benefits.
- The amount of accumulated funds in the joint account.
- Age at retirement.
Pensions are indexed depending on inflation in the country as a whole. In practice, during 2015-16. indexation of pension payments was not carried out. The government explained this by insufficient funds in the state budget.
About tax on pension payments
In 2015, the national Law of Ukraine came into force, which established tax deductions from pensions, the amount of which, taking into account indexation, exceeds three times the minimum wage in Ukraine at the beginning of the new reporting period.
The revolutionary idea of a new government of the country, which is strengthened by visiting people, is an innovation that has not been invented even in countries with dictatorial regimes.
The tax should be collected from the joint pension of all citizens, the amount of which exceeds the subsistence level, including the liquidators of the Chernobyl accident.
It is expected that 15% from all pensions that amount to $200 or more, that is, the starting point will be the amount of 3,654 hryvnia (8,623 rubles). At first, there was talk of levying a tax on 10,000 hryvnia.
The uniqueness of the tax has become the subject of discussion in the international community, since it has no analogues in the entire civilized world. The uncivilized world also did not hear about this and did not collect money from the poor.
For example, according to the UN, citizens who have an income of less than $500 per month or 11,200 hryvnia . Thus, the pension tax should be levied on an amount 3 times less than the established global poverty level.
In 2015, it was promised to stop withholding taxes on pensions, but nothing changed, and in 2021 the law continued in effect along with a massive reduction in pensions to 85% of the assigned amount until June.
At the beginning of June, under pressure from the public, in particular Chernobyl victims, a law was passed on tax exemption for all pension payments , which lasted almost 2 years.
According to the Ukrainian Pension Fund, income tax on pensions brought 1.1 billion hryvnia to the state budget.
Pension reform 2021 for military personnel
It is no secret that patriotism and professionalism alone are not enough to carry out any task. Encouragement is the argument that encourages you to do things conscientiously and not dream of finding a better field. Moreover, if we are talking about financial support for our defenders and (in particular) those fighters who are located directly in the combat zone.
The Prime Minister's address stated that pensions for military pensioners would be increased starting January 1. Their increase is planned in several stages due to the fact that it was not included in the 2021 budget, but the 2021 budget plan already provides for an increase for military pensioners.
According to Resolution No. 103, pensions were recalculated for retired military personnel from January 1, 2021, but they were paid an additional payment to their pensions in the amount of 50% of the monthly increase, and from January 1, 2021, this increase increases by another 25%. And their pensions will increase by another 25% from January 1, 2021.
The new amounts of military pensions are calculated as a percentage of the corresponding monetary support for military personnel (official salary, rank, length of service). The following stages of increases are envisaged for 2019-2020:
• 75% monthly of the amount that was determined as of 03/01/2018 (in 2019).
• 100% monthly of the amount that was determined as of 03/01/2018 (in 2020 and beyond).
Retirement age in Ukraine 2021
In order to receive pension payments in Ukraine, you must reach a certain age. For the male population it is 60 years old, for the female population it is 58 years old. There are certain categories of people for whom different conditions are intended.
Women who have reached the age of 45 and have worked for at least 15 years, and most of this work experience was spent working in mines, are entitled to pension payments.
Men who have reached the age of 50, have worked for over 20 years and have worked in mines for half of that time are entitled to receive pension payments.
Veterans who fought in Afghanistan have the right to receive a pension at the age of 50 years (women), 55 years (men).
Pension reform for miners
The retirement age for men and women in Ukraine can be changed depending on their professions and working conditions. Thus, the required length of service in order to qualify for monthly pension payments for teachers is, according to the new conditions, at least 30 years.
But people who work in mines can go on vacation after 25 years. If the miner was awarded certain awards for his work and performed his work conscientiously, this period can be reduced to 25 years.
New formula for calculating pensions in Ukraine
The principle of calculating payments has also changed. To update payments, the following formula is used:
PV = SZ * KZ * KS
Table 3. Decoding of the pension formula in Ukraine
| Index | Name | Note |
| PV | Old age pension payments | |
| NW | average salary | Takes the last 36 months by country |
| short circuit | Salary ratio | The ratio of SZ and pensioner’s earnings for a certain period |
| KS | Experience coefficient | Equated to 1% from 2021. (previously was 1.35% or more) |
Pension reform for pensioners of the Ministry of Internal Affairs
For pensioners of the Ministry of Internal Affairs it is somewhat different: the recalculation of pensions was done in 2016, but the increased amount began to be paid only in January 2018. In accordance with the government decree, payments for 2021 and 2021 remained unrecalculated. And from January 1, 2019, they will receive these funds in the amount of 50% of the increase. These are additional payments to their basic pensions, which were increased from January 1, 2018.
What has currently changed in the pension provision of pensioners of the Ministry of Internal Affairs (police):
• Deferred payments in the amount of 50% of the difference that formed between the monthly amounts of increased pensions and the monthly amounts of pensions received for 2021 and 2021 (in 2019).
• Deferred payments in the amount of 100% of the difference that formed between the monthly amounts of increased pensions and the monthly amounts of pensions received for 2021 and 2021 (in the first half of 2020).
Amount of benefits for pensioners for 2021
The legislative framework:
For persons who have reached retirement age, the legislative framework defining the procedure for the provision and amount of benefits is the Law of Ukraine No. 3721-XII “On the basic principles of social protection of labor veterans and other elderly citizens in Ukraine”, as well as other acts of legislation issued in accordance with with him.
Main benefits and guarantees:
Persons who have reached retirement age are guaranteed by the state the benefits listed in the third section of the law “Status of Elderly Citizens and Guarantees of Their Social Protection.”
Based on the standards of Article 32, pensioners are guaranteed free medical care in geriatric centers, hospitals for elderly citizens, other inpatient, outpatient and polyclinic institutions, as well as at home.
Taking into account the provisions of Article 34, if necessary, pensioners are provided with dental prosthetics, which is carried out free of charge or on preferential terms in the manner established by the Cabinet of Ministers of Ukraine.
According to Article 23, due to the additional costs of pensioners caused by the need for sanatorium-resort treatment (determined by the attending physician), they can receive targeted assistance in the amount and manner established by the Cabinet of Ministers of Ukraine.
Resolution of the Cabinet of Ministers of Ukraine No. 848 approves the list of persons who are entitled to a state subsidy for payment of housing and communal services; if the living conditions of a pensioner and his income correspond to those specified in the resolution, then he has the right to receive a state subsidy.
In accordance with the Resolution of the Cabinet of Ministers of Ukraine dated May 17, 1993 No. 354 “On free travel for pensioners on public transport,” persons who have retired due to age have the right to free travel in urban passenger transport.
Benefits for elderly citizens who do not have close relatives are approved by Law of Ukraine No. 3721-XII, list of main benefits:
- Exemption (in whole or in part) from payment for land or rent for land if you own a residential building, cottage or garden house (Article 30).
- Preemptive right to install a home telephone (Article 43).
- Establishment of guardianship or trusteeship to protect the personal and property rights and interests of single pensioners, if necessary (Article 39).
- Assignment of state social assistance for care in the presence of a medical certificate indicating the need for constant outside care (Article 24).
The standards of Article 30 establish the right of single pensioners who own a residential building to be exempt from the following types of fees:
- Payment for land.
- Land rent.
Also, single pensioners who have a dacha or a house in a horticultural society are exempt from land payments and land rent.
Important: according to Article 36, social assistance to pensioners who have lost the ability to self-care, at their request, can be provided directly at home or in the appropriate institution (boarding home, territorial social service center, home for veterans, boarding house for the elderly) where they are located temporarily or permanently.
Police pension reform
The retirement of new police officers is now tied not so much to age as to length of service. At the time of retirement, a person must be 45 years old, and the total length of service in law enforcement agencies must be at least 25 years (service in the police, state security agencies, and other law enforcement agencies counts). It is important to retire as a police officer that you need two years of continuous police service. In this case, the police officer receives 50% of the monetary support + 3% for each year of service over 20 years, but not more than 70% (100% in the case of participation in the liquidation of the consequences of the Chernobyl accident).
Pension reform for working pensioners
Throughout 2021, the second wave of pension reform will be carried out. First of all, actions will be taken to eliminate the shortcomings identified during the previous stage. The authorities now see the main drawback of the system in the amount of additional payment for pensioners who had sufficient experience, but low wages. Their income therefore increased by insignificant amounts. A calculation mechanism is currently being developed that can compensate for these shortcomings. Once these changes are introduced, length of service will have a greater impact than salary levels.
Over the past year, a problem was also discovered with the calculation of pensions for citizens who worked after retirement, but subsequently quit. For them, too, the amount of payments turned out to be too low, when the amount of wages after reaching retirement age was higher than during the retirement period.
When calculating the new amount of pensions, their insurance period was calculated, but at the same time there was a decrease in the coefficient. Therefore, the new pension payment to working pensioners in Ukraine will be slightly changed. In particular, in addition to the automatic accrual of length of service, such pensioners will now be given the right to independently choose the size of the income coefficient.
Pension reform for women
The changes in the pension reform affect all citizens without exception, including women. Of course, they are not compared to men in this matter, but the rules will be made stricter. In a special calculation table developed by the Ministry of Social Policy, you can determine the permissible age for completing work in accordance with the year of birth.
Thus, it becomes known that the retirement age for women in Ukraine who were born in 1962 can be 56 years old, but they should have completed all the necessary documents for payments before the beginning of 2019. Those born in 1963 can only claim pension payments when they turn 57 years old. At the same time, the preparation of the necessary documentation in their situation must take place before the beginning of 2020.
For everyone in general, as changes to the pension legislation of Ukraine in 2021 make clear, the following combinations of age and length of service are provided:
- At 60, only those who have an insurance record of (minimum) 26 years can go on vacation.
- At the age of 63, women whose insurance coverage ranges from 16 to 26 years can end their working period.
- At 65 years of age, people are allowed to go on vacation only if they have at least 15 years of experience.
As officials have already reported, the retirement age for women and men will continue to rise. The constant increase in requirements will continue until 2028. Then only people who have paid their monthly contributions fairly for 35 consecutive years will be able to retire.
Retirement age and insurance period
Formally, the retirement age for men and women remained at the same level - 60 years, however, the requirements for work experience have increased. Only those Ukrainians who have worked and paid contributions for 25 years or more can retire upon reaching retirement age.
With each subsequent year, the requirements for the amount of required insurance experience for a pension will increase (+ 12 months). Thus, by 2028 you will need to have 35 years of experience. Those who do not have it will be able to retire only at 63 years old. If by the age of 65 a person has less than 15 years of insurance coverage, he will not receive a pension. Instead, social assistance will be provided, the amount of which is determined based on the income level of the pensioner’s family.
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In addition, the Pension Reform provides for the provision of temporary state pensions to Ukrainian citizens between 01/01/2019 and 12/31/2020. social assistance. It is prescribed to non-working persons who have reached the established retirement age, have at least 15 years of insurance experience, but have not received the right to pension payments. Cash assistance will be issued for the period until the acquisition of the right to an old-age pension in the amount of the subsistence minimum for persons who have lost their ability to work.
Calculation of pensions in Ukraine under the new pension reform
In 2021, the government promised 3 significant innovations:
- Recalculate pensions taking into account inflation and average salary growth.
Recalculation of pensions under the new pension reform should be carried out according to the formula: 50% increase in inflation + 50% increase in wages. Since inflation and wages are constantly growing, this will be a mechanism for automatically updating pensions. To carry out such a recalculation, a separate government decision is not required. This mechanism will start working on March 1, 2021 (this date was chosen, since inflation for 2021 and the average salary will become known only in February 2019).
- Modernize pensions for those workers who had meager incomes in the past (collective farmers, health workers).
The mechanism for such recalculation has not yet been determined. There are 2 options: introduce for them a pension equal to 40% of the minimum salary, or apply the current formula, but use any 5 years of the highest earnings in the 2000s in the calculation.
- Improving the pension calculation service itself
Such an improvement will bring everything into an automatic system, which will allow the process of assigning a pension not to be completed in 10 working days, as now, but in just 15-20 minutes.
At least, these are the promises provided by the PFU. In addition, it will be possible to receive various types of administrative services - certificates of insurance experience and the like.
Also, each person will be able to find out what pension he can apply for electronically, using an electronic account and an electronic digital signature (EDS).
For example, if inflation growth is 109%, salary growth is 120%, and the accrued pension was 2864.50 UAH, then the recalculation will look like this:
- conversion factor = 109×0.5 + 120×0.5 = 114.5%;
- after recalculation, the pension in 2021 will be 2864.50 × 1.145 = 3279.85 UAH.
It is worth highlighting some categories of pensioners separately. For example, pensions of military pensioners and security forces pensioners have already increased by 25%, which was approved by government decree No. 103.
Funded pension in Ukraine: what you need to know
- The Cabinet of Ministers plans to begin implementing the funded pension system in Ukraine in 2021.
- Minister of Social Policy of Ukraine Marina Lazebnaya called on deputies to consider bill No. 2683 on the introduction of mandatory funded pension provision in Ukraine as urgent.
- Prime Minister Denis Shmigal said that the launch of a funded pension system in Ukraine in the next 10-15 years will allow attracting investment resources in the amount of up to $50 billion.
State budget 2021 and pensions
- On December 15, 2021, the Verkhovna Rada adopted the bill on the state budget of Ukraine for 2021.
- On the same day, December 15, 2021, Minister of Finance Sergei Marchenko, commenting on a question from one of the deputies about reducing Pension Fund expenses by UAH 8 billion in preparation for the second reading of the draft state budget for 2021, said that the 2021 budget has enough funds for pension payments.
- It was planned that pensions would be indexed by 11% from March 1. In April, automatic recalculation of pensions for working pensioners is planned, taking into account the amount of salary and length of service.
- Starting from January 1, 2021, Ukraine began to increase pensions for certain categories of pensioners. In particular, pensions increased by 300 UAH - to 2400 UAH, the increase applies to those who are over 65 years old and whose work experience is 30 years for women and 35 years for men. The increase is due to the increase in the minimum wage in Ukraine, which will be increased for the second time from December 1, 2021 - accordingly, then the pensions of this category of pensioners will increase again, from 2400 to 2600 UAH.
- On January 27, the Cabinet of Ministers approved a bill on indexation of pensions for all pensioners from 2022, which will be submitted to the Verkhovna Rada for consideration.
- On February 17, 2021, during a meeting, the Cabinet of Ministers approved the budget of the Pension Fund of Ukraine for 2021.
- In addition, in 2021 in Ukraine the minimum pension will be increased twice (by a total of 9.3%) - corresponding to the increase in the cost of living for persons who have lost their ability to work.
- From March 1, 2021, a planned indexation of pensions has been carried out in Ukraine, which will amount to approximately 11%. In addition, Ukrainians over the age of 80 began to receive a monthly additional payment of 500 hryvnia (if their pension does not reach the average salary in Ukraine, which is taken into account for calculating pensions).
- From April 1, 2021, Ukraine planned to recalculate pension payments to working pensioners, taking into account length of service (or length of service and earnings) acquired after March 1, 2021.
- From July 1, 2021, pensioners aged 75 to 80 years will begin to receive a monthly supplement in the amount of 400 hryvnia (similarly, if their pension does not reach the average salary in Ukraine, which is taken into account for calculating pensions).
- In July 2021, pensions will be indexed for 1 million pensioners who were granted pensions in 2018-2020, as well as for those who receive a minimum pension.
Author:
Elena Kovalenko
Summing up
According to the State Statistics Service, currently in Ukraine the number of people who work and pay contributions to the Pension Fund is almost equal to the number of those who are already on a well-deserved rest.
So, on average, one Ukrainian who works supports one pensioner (this is exactly what the official statistics say). However, due to the fact that a considerable number of workers receive salaries in envelopes and the employer does not pay contributions to the Pension Fund for them, as well as the number of those who go abroad in search of a better life, in the near future this proportion may swing significantly towards the elderly of people.
