The slow-burn crisis inside Ukraine’s pension system

Adramatic situation with state pension provision is unfolding in Ukraine. In autumn last year, Ukrainian prime minister Denys Shmyhal stated that if “decisive measures” are not taken, then in 15 years the state will not be able to pay pensions.

With the collapse of the Soviet Union, Ukraine inherited a so-called “solidarity pension system”: current pensioners are supposed to receive payments from pension contributions made by the working population. However, today the number of people employed in the Ukrainian economy is constantly falling. Accordingly, pension contributions are sorely lacking to pay even meager – by European standards – pensions.

The first attempt to reform Ukraine’s pension system was made 15 years ago – through the launch of non-state pension provision. The government allowed private pension funds to accept voluntary contributions from citizens – with the expectation that they will receive pension payments in the future. But private pension funds never became popular due to their unreliability, on the one hand, and extremely low salaries in Ukraine, on the other.

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