New pension reform: Genocide of Ukrainian retiree

Author : Olexandr Honcharov

When listening to Prime Minister Groysman on pension reform-2 issues, it seems that he hardly understands the content of these reforms and the direct dependence of the state budget on the devaluation of hryvnia

11:15, 11 October 2017

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112 Agency

Current government preferred to forget that their political predecessors, particularly economist Serhiy Tigipko initiated the pension reform-1, which was approved by the Verkhovna Rada on July 7, 2011. Firstly, retirement age was raised for women and civil servants (the age of retirement for women was gradually increased from 55 to 60 years, for civil servants the retirement age was raised from 60 to 63 years). The minimum required length of insurance for receiving a pension was raised from 5 to 15 years, and for the newly appointed pensions, the statutory length of the length of the insurance period for assigning an old-age pension was raised for women from 20 to 30 years and for men from 25 up to 35 years.

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Now you see who first started raising the age of retirement and insurance experience in Ukraine! And on October 3 this year, the people's deputies went even further in "improving" the lives of our citizens and significantly more tightened the requirements for the insurance period. In particular, in 2018, to retire at the age of 60, a person should have 25 years of experience. With an experience of 15-25 years, you can retire at 63 years old, less than 15 years - at 65 years. People who do not have the necessary insurance experience will only be able to obtain social assistance when they reach 63 years. This is despite the fact that Ukraine has very high mortality of men in middle age.

Secondly, II Accumulative level of the pension system from January 1, 2019 envisages mandatory formation of personal savings accounts for workers under 35 years. But where to invest your pension savings in conditions when the Ukrainian securities market is actually killed? There are only 4 issuers in the listing basket of the largest Ukrainian stock exchange, and only two public joint-stock companies are traded. The real estate market uncontrollably collapses. And only a madman would make a bank deposit in a potentially insolvent bank. And how to earn investment income in these conditions?

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In 2011, Deputy Prime Minister Tigipko cheerfully, just like current Minister of Social Policy Andriy Reva does it now, predicted: in 2013, the budget of the Pension Fund will be deficit-free, which means that in 2013, we would be able to introduce the second level of the pension system. But we know the real price for such promises and forecasts. Let me remind you that today the deficit in the Pension Fund of Ukraine has almost become 5,7 billion USD. And apparently, this is not the end. There are no guarantees that Ukrainian pensioners would further get their pensions.

In this regard, people's deputies would adopt the law that the state budget of Ukraine will become an attachment to the Pension Fund. And this is not a joke. For example, Georgia does not have a pension fund, but there is a universal state budget, from which funds are allocated to pay the pensions.

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When you listen to the recent speeches of Prime Minister Groysman about the specifics of the pension reform-2, it seems that he hardly understands the content of these reforms and the direct dependence of the state budget on the devaluation of the hryvnia and economic growth. Of course, it is possible to accumulate foreign currency loans in the shortest time, then devaluate the hryvnia, stop paying pensions and salaries at state-owned enterprises, and then by the end of 2018 the GDP growth of Ukraine (on paper) will be still more than 3%. Maybe, they believe that this scenario is perfect for our weakly educated public.

Finally, can Groysman’s Cabinet and the Verkhovna Rada give some guarantees that pension legislation will not change in 10, 15 or 20 years, when those who accumulate pension capital in the Fund II of the Accumulation will be retired? And is there any guarantee that the new pension law will be active for so many years? For example, the pension reform named after Tigipko "survived" for no more than 6 years.

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We all need to ask ourselves a very important question: who is responsible for our future pension - the state, my employer or myself? I am sure that the illusions about the fact that the state is responsible for my decent pension have long disappeared. Therefore, in the coming years, most likely, people will be more active in developing their own pension strategies, investment in securities, real estate or their own children. However, this does not add to us confidence in the future.

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