The EBA asks the IMF to support the second level of pension insurance

13/ 08/ 2018

The European Business Association (EBA) has appealed to the International Monetary Fund (IMF) and the Directorate of the World Bank for Belarus, Moldova and Ukraine. In an official letter, the Association commented on the importance of introducing the second level of pension insurance for the population in Ukraine, financial losses from the inhibition process, and the minimum spending on the implementation of the reform. The business community stressed that with a solidary system the rate of replacement of the lost wages by the retirement age would be steadily declining from todays 32% to 18% over the next 30 years. As an example, from 1.6 thousand UAH now to 900 UAH in 30 years. It is important to make effective steps that will reduce the pension system deficit. In Ukraine, about 12 million people are at the age of retirement. The deficit of the pension fund is more than 200 billion UAH. The pension system can’t exist this way anymore. And the number of people of retirement age is increasing every year. With such disproportion between taxpayers and pensioners, its difficult to talk about the stability of the system, - emphasizes the European Business Association. Currently, in Ukraine we can see an aging of population and a decrease in its number also due to working-age migration. According to the experts’ preliminary calculations, the ratio of workers to pensioners will be 10 to 15 by 2050. But workers, in fact, are potential donors of the pension system. As a convincing solution of the situation, the business community sees the introduction of the second pillar of pension insurance - from January 1, 2019. The system minimizes corruption risks. First, due to the diversification of population savings among dozens of non-state pension funds. The State pension fund will be the only administrator of savings, non-state pension funds will be their actual managers. Secondly, every citizen will have the opportunity to carry out daily control under the savings and ensure the correctness of accruals. There will be a right to transfer to another fund at any time. In other words, everyone will be able to deliberately choose a fund to store their own savings and personally control the process of storage. Savings in the accumulation system will be kept in private accounts and will bring investment income to the participants of the accumulation fund. After reaching retirement age, citizens will be entitled to a retirement pension, a defined-term pension or a one-time pension payment. Business supports the idea of an accumulation system. The mechanism for its implementation is highlighted in Draft Law No. 6677. The document has more than 10 positive reviews from domestic and international experts, and the norms are in line with the profile of the European Parliament and the Council. The European Business Association appeals to the IMF and the World Bank to support this document. Hopefully, this will help to complete the process of building the second pillar of pension insurance in a comprehensive manner and stabilize the pension system in general.

The European Business Association (EBA) has appealed to the International Monetary Fund (IMF) and the Directorate of the World Bank for Belarus, Moldova and Ukraine.

In an official letter, the Association commented on the importance of introducing the second level of pension insurance for the population in Ukraine, financial losses from the inhibition process, and the minimum spending on the implementation of the reform. The business community stressed that with a solidary system the rate of replacement of the lost wages by the retirement age would be steadily declining from today’s 32% to 18% over the next 30 years. As an example, from 1.6 thousand UAH now to 900 UAH in 30 years.

“It is important to make effective steps that will reduce the pension system deficit. In Ukraine, about 12 million people are at the age of retirement. The deficit of the pension fund is more than 200 billion UAH. The pension system can’t exist this way anymore. And the number of people of retirement age is increasing every year. With such disproportion between taxpayers and pensioners, it’s difficult to talk about the stability of the system”, – emphasizes the European Business Association.

Currently, in Ukraine we can see an aging of population and a decrease in its number also due to working-age migration. According to the experts’ preliminary calculations, the ratio of workers to pensioners will be 10 to 15 by 2050. But workers, in fact, are potential donors of the pension system.

As a convincing solution of the situation, the business community sees the introduction of the second pillar of pension insurance – from January 1, 2019. The system minimizes corruption risks. First, due to the diversification of population savings among dozens of non-state pension funds. The State pension fund will be the only administrator of savings, non-state pension funds will be their actual managers. Secondly, every citizen will have the opportunity to carry out daily control under the savings and ensure the correctness of accruals. There will be a right to transfer to another fund at any time. In other words, everyone will be able to deliberately choose a fund to store their own savings and personally control the process of storage.

Savings in the accumulation system will be kept in private accounts and will bring investment income to the participants of the accumulation fund.

After reaching retirement age, citizens will be entitled to a retirement pension, a defined-term pension or a one-time pension payment.

Business supports the idea of an accumulation system. The mechanism for its implementation is highlighted in Draft Law No. 6677. The document has more than 10 positive reviews from domestic and international experts, and the norms are in line with the profile of the European Parliament and the Council.

The European Business Association appeals to the IMF and the World Bank to support this document. Hopefully, this will help to complete the process of building the second pillar of pension insurance in a comprehensive manner and stabilize the pension system in general.