Cabinet plans to submit draft laws on defined contribution pension system in September - Zholnovych
The Ministry of Social Policy has finalized a draft law on a professional defined contribution pension system. It can start working in 2026.
This was announced by Minister of Social Policy Oksana Zholnovych in an interview with Ukrinform, Censor.NET reports.
"We have finalized it (Draft Law on Accumulative Pension Provision No. 9212 - Ed.), as advised by the Verkhovna Rada. We took a comprehensive approach to the document, because a single component will not work. There must be a whole system of components.
Our pension system, like the systems of many other countries, has several components: solidarity, mandatory funded, voluntary funded, and we also want to introduce a professional funded pension plan.
The current system has been subject to many changes. This has made pension calculation more complicated. Currently, it contains a lot of allowances and supplements, such as a supplement to the subsistence minimum, a supplement for length of service, etc. People are forced to go to specialists to calculate their pensions because it is almost impossible to do it on their own. We want to simplify this mechanism.
We are currently designing a system that will take into account two criteria: the number of years a person has worked and the number of contributions they have paid each month. This will be converted into a certain number of points. Accordingly, the value of each point will be equal to 30% of the average salary in a particular year. So, if you have worked for 35 years and received the average salary each month as it was then, you can expect at least 30% of your earnings in the PAYG pension system. In addition, we can guarantee that if you have worked for at least 15 years and entered the pension system, you are definitely entitled to 30% of the minimum wage in that year.
In total, this will result in a replacement rate of 40% of a person's earnings in the PAYG pension system alone. At the same time, the solidarity contribution to the pension system is 18%, and we return 40%. This is a twofold increase - no other bank gives such an increase. The solidarity system is the most reliable because it is guaranteed by the state and actually gives a very good increase.
But this is not the only component that we project as a person's future pension. We plan to introduce professional savings starting in 2026. A corresponding draft law has already been developed for this purpose. Such savings will be balanced by reducing the tax burden on the employer. Then a person will be able to save at least 20% of his or her lifetime earnings. And this will amount to 60% in total. And if we count voluntary savings for those who will have a professional system, we will get at least 60% of the income a person earned while working. This is a good replacement at the level of the EU standards and all developed countries," the Minister said.
"We plan to submit the relevant draft laws to the Verkhovna Rada in September. Obviously, we will have to work with MPs on them. At best, we will be able to adopt them in early 2025. Then we will need time for IT solutions: it is very important for us to avoid involving a lot of manual work. Everything should be transparent, clear and digitized. I hope that the systems will start working in 2026," Zholnovych added.
