Storage resources in the world make up 85% of their GDP, in Ukraine – 0.16% of GDP – experts call on the authorities to introduce funded pension system

Storage resources in the world make up 85% of their GDP, in Ukraine – 0.16% of GDP – experts call on the authorities to introduce funded pension system
January 22, 2016.

Kyiv, January 22, 2016. Experts at a press briefing at Ukraine Crisis Media Center called on the authorities to introduce a funded pension system and complete the three-tier pension system. According to Marianna Onufryk, Expert on Social Policy Issues, Institute for Social and Economic Research, in July last year Ukraine signed a memorandum with the International Monetary Fund (IMF), and introducing a funded pension system was among the commitments of our country. However, the corresponding draft law has not been submitted to Parliament yet. “Introduction of a funded system is not only the state obligation, recorded in the memorandum with the IMF; it is also a requirement of the coalition agreement, the program of the Cabinet of Ministers, Strategy 2020. […] Thus, all agreements and commitments in accordance with the strategic documents in Ukraine are violated,” said Marianna Onufryk.

The largest expenditure item in this year’s budget is pension costs – more than 140 billion, she said. And every year expenditure item increases, besides the Pension Fund allocates part of the costs, but pensions are still scanty. Therefore, it is necessary to introduce the world practice of a three-tier pension system, said Vitaliy Melnychuk, Vice-President at the investment company “KINTO. That is, it is a reformed pay-as-you-go (PAYG), mandatory and voluntary savings system, he explained. Ukraine has not launched the second level yet, and the third began to work, but without the support of the second, and if the state does not pay attention to the issue, it works poorly, and total savings are small. The “number of participants in this system is only 800,000 people, while in PAYG – more than 12 million as of today,” said Mr. Melnychuk. “Today, storage resources in the world are about 35 trillion dollars, 85 percent of their GDP, while our retirement savings are 0.16 percent of GDP, which is 3.1 billion hryvnia,” he said. Therefore, according to him, the key task is to complete the integrated pension system with all its components.

Oleksandr Tkach, Deputy Director at the “Pension-Actuarial Consultant” LLC, reminded that non-state pension system in our country was launched in 2004. According to him, there are about 70 private pension funds today. But only several dozen are fully functioning, said Oleksandr Tkach. However, the expert called the system reliable and efficient. “For the last 10 years, no pension fund has gone bankrupt,” he said and explained that the advantage of the system is that not only the employee, but also the employers pay contributions to this fund. “And if they both pay equally, it will increase savings and provide protection against inflation,” said Mr. Tkach.

Galyna Tretiakova, General Director at the Ukrainian Insurance Federation, said that a mandatory funded pension system, so-called second level, should include a number of points. According to her, savings should, first of all, be property that can be inherited by family members; they should provide the opportunity to borrow, for example, to treatment, and for the payment of interest on mortgage lending or children’s education.

Share

Twitter