Ukraine’s population “aging”, the considerable part of able-bodied young men went abroad, so in the public Pension Fund deficit is created, and it has to be subsidized from the state budget. Solidarity pension system can not provide the Ukrainians acceptable pension.
In most developed countries, there is a three-tier pension system, which typically includes the payment from the budget or state pension Fund (it is a solidarity system or the first level), the payment of funds or other financial institutions where the principle of accumulation has made contributions for their employers or themselves (mandatory funded system), and payments from financial institutions where people have been making voluntary financial contributions while working (accumulative system).
On the necessity of introducing multi-level pension system in Ukraine has long been referred to. Specialists gave recommendations to change the pension system in the early 2000s. In the last 10 years in Parliament there were several bills on this topic, but further conversations business is not has reached.
Last year, on December 27, the Verkhovna Rada proposed a new bill (No. 2683), which can give a start to the introduction of a second tier pension provision – mandatory cumulative.
Structure of the mandatory funded pension system under the bill will be quite difficult. Money citizens paid in the form of contributions to the obligatory insurance, will come to the Pension Treasury. This legal structure should create a Cabinet in the form of legal entity of public law. Be managed, the Treasury would be two structures. To conduct (administer) account of the mandatory accumulative system will be some attracted by the Central administrator. And to manage the Affairs of the Pension Treasury (i.e., control its operation) will be the Board of Pension Treasury consisting of 5 people who will be selected on a competitive basis.
Despite the fact that the money of Ukrainians will come to the Pension Treasury, dispose of this structure right will have . The bill also provides that Pension, the Treasury will exist in the deductions from the pension funds but not more than 0.1% of the value of accumulated assets (as in the first two years of its existence, its costs will be borne by the state).
All of these employees money Pension, the Treasury will transfer to sbereganie in banks-custodians. There will not lie dormant, waiting for their owner to retire. The money of Ukrainians are not worthless, they are forced to work and to acquire interest.
To dispose of collected funds in the period of their storage shall be the company’s asset management and private pension funds. The employee will be able to choose whom to trust with their money. And to decide what actually needs to use his money, that is, to choose the pension portfolio: balanced, conservative, or dynamic. Form of future pension payments can also be different: one-time, accelerated, program, lifetime.
The Pension Treasury is to help employees with the choice of Directors and the retirement portfolio, as well as to distribute his money between several companies-stewards (to diversify).
“The pension Treasury is primarily intended for persons who for certain reasons it will be difficult to choose one or the other financial institution (an authorised company asset management or an authorized non-state pension Fund) and that competitively attracts other market infrastructure entities (companies asset management and custodians) to ensure effective investment and protection of participants”, – stated in the explanatory note to the bill.
The size of the cumulative contribution
The bill No. 2683 States that the contributions to mandatory funded pension provision will do and employers (other than the ECB), and the workers themselves. Employers will be required to transfer 2% of the employee’s wages, and each working Ukrainian – at least 1%, and if you want – and more. The employer will be obliged in proportion to contributions to Supplement the employee’s own contributions up to 5% of the amount of wages such employee.
Note that, unlike the current solidarity system, under a funded system the contributions are the property of the person who paid them. They arrive at his personal expense, the right to use them comes only after retirement. And in the case of death of the person the money is transferred to his heirs (the bill provides that they will receive a one-time payment).
However, mandatory contributions to funded pensions are only wage earners. Entrepreneurs and other self-employed people will pay such fees only on a voluntary basis.
Does not depreciate if the accumulated pension money
Economists variously estimate the introduction of mandatory pension savings. So, the President of investment Fund “the University” Taras Kozak believes that this will increase the size of pensions for those citizens who will make contributions to the system of mandatory insurance.
“This bill is just introduced, and it probably will evolve. So while I can say only one thing: it’s good that he brought to the Parliament. The introduction of second level of pension provision and the mandatory, has long been on the agenda, in fact since 2003. And the lack of such a system is a big problem in several aspects. First, without a funded system, pensioners can’t live richly. With an ageing population, economic crises, traveling abroad working-age population means the Pension Fund is not enough, and it needs to subsidize from the budget. That is, the solidarity system itself is not working. All countries have realized that a joint system could not provide more or less decent pension. We need a set of several types of pensions. Second, of the pension is “long” and cheap money in the economy. Here we have bad roads, old infrastructure – the whole infrastructure of the cities is 100% worn out. They need to change, but where to get the money? The state has no such money. And to attract investment – it’s expensive, because the water main or sewer pay off only in 20 years. In many countries in the world use for these purposes, the money of the pension funds, which have “long” money, that is, that people pay for years and decades, but do not use them. Besides, it’s cheap money. That is, if inflation is 2%, the pension Fund is willing to invest the money at 3-4%. Such cheap money nowhere to take more. And so, on the one hand, the citizen will have more reliable infrastructure and more revenues for your contribution,” – said Taras Kozak.
At the same time, economist Boris Kushniruk not so appreciates innovation. A more reliable and profitable believes the pension contributions that are not exactly “burn”, for example, in real estate.
“I was and remain a supporter of the implementation of the funded pillar, but only as voluntary. Because in fact it will be a new mandatory tax, and we need to reduce the pressure on businesses and on the population, to avoid attempts to escape from formal employment. A two-tier system would be better. And I also support the idea of mandatory contribution was reduced to a minimum. Of course, one must understand that the state will not be able to provide the people with some kind of decent pension, it is unrealistic task in conditions where the number of workers is shrinking relative to the retirees. This is a global trend in most developed countries. The state should assume the obligation to guarantee only a minimum. Because when a person enters into retirement age and it has no accumulated funds, the state is still liable to pay him some minimum. But you need to create a system of incentives so that people have accumulated for their retirement. And I advocate, for example, this form of accumulation, as a contribution to your own property. And this must subsequently bring a person income: it can take your property to rent, may sell it and get money. And thus he will have more guaranteed income than pension funds or insurance companies who may go bankrupt and leave the person with nothing,” explains Boris Kushniruk.