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Ukraine's slow road to state pension reform

Author : Olha Chaika

10:23, 27 June 2017
Ukraine's slow road to state pension reform

Author : Olha Chaika

The bill includes cancellation of the taxation of pensions, their automatic renewal, and increase of insurance experience length

10:23, 27 June 2017

Read the original text at 112.ua.

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A pension is not a subsidy of the state, but a result of person’s labor throughout her life. This opinion has been repeatedly expressed by Prime Minister Groisman when announcing pension reform. The bill submitted to the Verkhovna Rada for consideration confirms this idea. A person has to earn a pension.

Insurance experience is above all

If you are a pensioner and every month you get your 1312 UAH (or more), you should hope for better: this sum would be recounted, and you would get some more money. At least a little bit more (from 200 to over 1 thousand UAH). Scientists, prosecutors and deputies - no one will cancel your pensions.

But if you are more than 49 years old, then it is time to organize yourself – the changes will primarily affect you. And the first thing you need to find out is what kind of insurance you have. In other words, how long have you worked with the official registration and paid contributions to the Pension Fund. If you count 25 years (or better - 35) or more, and especially if you continue to work and your experience would increase - everything is good for your: when it's time to retire, you will receive a monthly fee based on your experience and salary, the amount will be automatically updated every year starting from 2021.

Related: Poroshenko instructed Cabinet of Ministers to raise pensions and abolish taxation on them

What should be the length of service for retirement by age?

  • To retire at 60 years - 25 years of experience in 2018 (and every year for 12 months more up to 35 years in 2028);
  • For retirement in 63 years - from 15 to 25 years of experience in 2018 (and also every year for 12 months more up to 25-35 years in 2028);
  • For retirement in 65 years - at least 15 years of insurance in 2019 (and every year the upper limit for 12 months more up to 15-24 years in 2028).

If the length of service is not enough, you can "buy" it - pay the insurance premium for the number of months that are not enough - but not more than 2 years. The payment cannot be less than the minimum contribution, the coefficient for the first year is 2, for the second year it is 1.5.

So, now the employer pays an amount equal to 22% of the salary of an employee in the Pension Fund. After raising the minimum price to UAH 3,200, the minimum payment is 704 UAH. To "cover" an additional year, when you did not work, you must pay a minimum of 16 thousand 896 UAH (minimum contribution, multiplied by 12 months with a factor of 2). For the next year it is necessary to pay a minimum of 12 thousand 672 UAH.

Related: If pension reform has negative result, government ought to resign, — Reva

So, a potential pensioner would pay some 29 thousand 568 UAH. Taking into account the fact that every year the required length of insurance would increase for a year, someone might find this option attractive.

If you are 49 years old, if this pension reform is adopted, it will be advisable to think over an action strategy that seems to be optimal for you.

For those who do not deserve pension – 412 UAH monthly

Retired people who in 2018 and later turn 65, and the insurance period at the time of reaching such an age is less than 13 years (when "hiring out" does not help), the state offers "state social assistance." The amount of such assistance has already been prescribed in the law "On State Social Assistance to Persons Who Do not Have the Right to Pension and Persons with Disabilities" and provides for 30% of the subsistence level for persons who have lost their ability to work (from the beginning of 2018 this is 412 UAH).

We can assume that if the reform is introduced this norm will concern more and more people.

Related: IMF and World Bank approved Ukrainian pension reform, - Ministry of Social Policy

This pension reform is aimed at "leveling" the situation with pensions for various categories of citizens. The prosecutors, deputies, diplomats, civil servants, scientists, representatives of local self-government, and journalists are transferred to general pension provision. They will get the same pension, as well as the others.

The list of persons who are able to retire earlier than others has been expanded. This category includes:

  • Lilliputians, disproportional dwarfs,
  • Blind people,
  • Mothers of five children,
  • Actors of theatrical, concert and other entertainment venues,
  • Women who work as tractor drivers, machinists of construction, road, and loading machines, mounted on the basis of tractors and excavators,
  • Women who work as milkmaids (milking machine operators), pigs-operators on collective farms, state farms, and other agricultural enterprises,
  • Workers of textile production, employed on machine tools and machines,
  • Drivers of urban passenger transport (buses, trolleybuses, trams), and heavy vehicles engaged in the technological process of heavy and harmful production,
  • Workers of the bottomhole, drifters, slaughterers on jackhammers, machinists of mining excavating machines, steelworkers, agglomerates, hot rolling millers, surface metal defects handlers in hot areas, machinists of cranes in metallurgical production (sections of heating wells and strippers),
  • Military personnel.

For special merits: terms and conditions of renewal

Pensions for special merits are established by the territorial body of the Pension Fund of Ukraine. The scheme for determining the amount of the allowance is set by the Ministry of Social Policy, depending on the merits. If a person has the right to an allowance for several reasons, he is assigned a larger one.

Related: Groysman announced increase of pensionable service period to 25 years

Related: Groysman ready to resign if pension reform is not undertaken

In order to receive an allowance for special merits a person has to apply to the local Pension Board and provide all the necessary documents within 3 months from the date of acquisition of the right to a surcharge.

If the subsistence level for disabled people increases, the Pension Fund itself would recalculate the allowance for special merits from the date of introduction of a new level of the subsistence level. The procedure for filing an appeal for such an allowance will be approved by the Board of the Pension Fund in coordination with the Ministry of Social Policy. The decision on this issue can be appealed in the Pension Fund, the Ministry of Social Policy and in court.

Related: IMF did not approve pension reform, — source

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