REUTERS
Ambassadors of G7, namely the United States, Great Britain, France, Germany, Italy, Japan, and Canada, have called on the Verkhovna Rada, Ukraine's parliament, to adopt the pension reform proposed by the government before the end of the next plenary week, that is, before July 15, according to a statement by the G7 Ambassadors.
"We, the G7 Ambassadors, wish to express our strong support for the pension reform plan proposed by the Ukrainian government, and we call on the Rada to adopt the legislation without delay during its plenary session next week. Pension reform is one of the greatest challenges for any government, and we commend Ukraine's leaders for undertaking this overdue reform with political courage and vision," the statement said.
The ambassadors also point out that today pensioners in Ukraine represent more than one fourth of the population; while average pensions are extremely low, Ukraine pension spending – totaling 11% of GDP – is among the highest in Europe.
This discrepancy speaks volumes about the need to restore a proper social contract between the state and its citizens, and to swiftly adopt a pension reform that improves the fairness, predictability, and sustainability of the system.
"We believe that the pension reform proposed by the Government, which was developed in close cooperation with the IMF and World Bank, meets these objectives. The draft law foresees a more transparent and fairer pension calculation formula that more closely ties pension benefits to pension contributions and improves the adequacy of pensions. The reform also establishes a flexible retirement age, linked to the length of the formal career of an individual and incentivizing participation in the system. The proposed reform will also generate fiscal savings by improving the accounting and sustainability of the Pension Fund and Ukraine's overall state budget," the ambassadors added.
Read alsoWorld Bank supports draft pension reform in Ukraine – social policy minister As UNIAN reported earlier, the pension reform does not provide for raising the retirement age, while increasing pensions by the sum varying from UAH 200 to UAH 1,000 as of October 1, which, according to preliminary estimates, will involve some 5.6 million Ukrainians. So, a person will need to have at least 25 years of pensionable service to retire at age 60, whereas retirement at 63 will be possible with the pension insurance record from 15 to 25 years, and at 65 if it is less than 15 years. At the same time, people without the pension insurance record will be eligible to apply for social assistance when they reach 63. The size of assistance will be determined based on the income level of the pensioner's family.
The minimum pension insurance record will be extended by one year every 12 months until 2028. Thus, starting from 2028, a person needs to have 35 years of pensionable service to retire at 60. At the same time, the government version of the pension reform provides for the possibility of "buying" up to five years of the pensionable service. So, if a person had to buy the pension insurance record now, under these rules, he or she would have to pay UAH 16,896, or about US$648, for the first year.
The reform also abolishes special long-service pensions paid to state officials, introducing a single formula for calculating the amount of pensions.