New methods of calculating and indexing pensions: living standards may change significantly

New aspects of pension policy will be formed in Ukraine, which will have a significant impact on the financial well-being of many people.

According to People’s Deputy Danylo Getmantsev, this concerns the introduction of new mechanisms for calculating and indexing pensions to ensure greater fairness and compliance with the real needs of elderly citizens.

The level of replacement of labor income by pension payments can be used to assess the effectiveness of the pension system. In European Union countries, this indicator averages 58%, while in Ukraine, it is only about 27%, making it difficult to ensure a decent standard of living for pensioners.

This situation is primarily caused by the decrease in the length of service coefficient during the pension reform in previous years when it was reduced from 1.35 to 1% for each year of work. This led to a decrease in the size of new pensions and a gradual decline in the overall level of their provision.

On the agenda is a review of the pension system. In particular, the following changes are planned:

to set the minimum pension at a level of not less than 4,000 hryvnias;
to ensure an increase in the average pension to 40% of the average wage (instead of the current 27%);
to implement measures to de-shadow salaries to increase contributions to the Pension Fund;
to cancel privileged pensions for specific categories of civil servants;
to quickly introduce a funded level of the pension system.
With the introduction of new approaches to calculating and indexing pensions, average payments may increase to 8,142-9,540 hryvnias, which will significantly improve the living conditions of older people and bring Ukraine’s social standards closer to European standards.

Earlier, it was reported that additional payments would be made to pensions for people who worked overtime, as well as the conditions for obtaining additional pension experience. New additional payments of 800 hryvnias per month for pensioners were also announced.