What pensions will the generation of the 90s receive in Ukraine?

What pensions will the generation of the 90s receive in Ukraine?

Do you know three quarters of pensioners in Ukraine live below the poverty line? They receive from the state an amount less than the officially recognized subsistence level. At the same time, the average pension in the country is 120 dollars. This amount is four times less than the average salary in Ukraine.

The problem is not everything is bad now, but that the situation is unlikely to improve in the near future. It will become even worse. There has been only talk about reforming the pension system for two decades. But nothing of this has happened in practice. If this continues, then the children of the 90s in 30-40 years will receive a pension, which will be even less than now.

Why is this happening? What is the reason for low pensions in Ukraine?

When in many countries of the world there are three levels of pension provision, which complement each other, only the solidarity pension is fully functional in Ukraine. It works simply: working people pay money to a pension fund, and this money goes to pay pensions to pensioners.

In Ukraine, such a system could work if there were several times more employees than pensioners. However, there are fewer of them: about 10,000,000 people paying SSC and 11,000,000 pensioners. So, every worker pays a pension to just over one pensioner. About 80% of paid SSC go to retirement. When we know how much SSC are paid by ordinary workers with the minimum wage, it becomes clear why pensions are so low.

Therefore, the pension fund constantly lacks money and is financed additionally at the expense of taxpayers. For example, in 2021 the deficit will be at the level of UAH 26,000,000,000. This cannot continue, because the number of pensioners is growing and the working-age population is decreasing. More and more funding from taxpayers is required. Sociologists are confident the population of Ukraine is aging rapidly. The situation will get worse in decades.

This means children of the 90s can not only receive a small pension, but generally never see it. Because pensions will be paid to them by young people who are being born now. In 2021, 350000000000 hryvnia will be allocated from the budget for pensions, taking into account SSC. These are, for example, three military budgets of a country at war. Pensions were the largest expense item always in all budgets of Ukraine. Raising the retirement age does not solve the problem, but only temporarily improves the situation. Even the prime minister says in 15 years, every worker will support two retirees.

The only thing can save the situation is a comprehensive pension reform. In addition to the solidary pension, there is work in the funded pension. How much you save for retirement, so much you get. For example, in Germany the solidarity pension is small. But accumulation is enough to live well. Of course, people spend their entire lives saving money for themselves, rather than paying pensions to strangers. But the implementation of such a reform is a very unpopular and difficult decision. If there is an opportunity to choose where to pay money: to retire or to current retirees, then any person will choose himself.