Pensions increase in Ukraine – Cabinet of Ministers

Ukraine's Cabinet of Ministers says pensions will be automatically indexed in the country, growing by 11% from today, March 1, 2021.

That is according to Resolution No. 127 of February 22 published on the government's portal.

The average surcharge will be UAH 308 (US$11.02), while the minimum one UAH 100 (US$3.58). According to the Pension Fund, the majority of Ukrainian pensioners (about 7 million people) receive a pension within the range of UAH 2,000 (US$71.56) to UAH 4,000 (US$143.11). Thus, the indexation surcharge for them stands at UAH 220 (US$7.87) – UAH 440 (US$15.74).

However, the Social Policy Ministry noted that not all pensions would be recalculated.

Estimated and actual pensions: The difference

The increase in retirement benefits applies only to the so-called estimated pensions, calculated by a special formula for each retiree, taking into account their average salary over the years of work, the average salary in Ukraine for the last three years, and the employment term. At the same time, the actual pension can be higher if it includes all kinds of additional payments and allowances.

A pensioner will not feel the increase if the difference between their estimated pension and the actual one is below 11%.

Read alsoCabinet approves Pension Fund budget for 2021Calculation of pension supplement

The formula for calculating the increase in pensions depends on two parameters: inflation growth (5% in 2020) and average salary growth (17%). These indicators are summed up and divided by two (5+17)/2=11.

For those whose pensions will increase by less than UAH 100 (US$3.58) under the plus 11% formula, the supplement will still be rounded up to UAH 100.

Persons entitled to pension supplement

The increase in pension payments in March will refer to retirees who receive:

• Retirement-age pensions;
• Disability pensions;
• Survivors' pension benefits; and
• Long-service pensions (healthcare workers and teachers, whose employment term in the profession is at least 30 years).

Persons who are not subject to the March indexing

• Pensioners who retired from the beginning of 2021 (as pensions are indexed for 2020);
• Retirees receiving the maximum pension (UAH 17,690/US$633);
• Former civil servants – if their pension is higher than that related to retirement-age pensions; and
• Military pensioners for whom the pension is calculated by a special formula.

As for military pensioners and persons equated to them, bill No. 2141 as regards their retirement benefits has passed only its first reading.

The next recalculation of pensions is scheduled for April 2021. It will apply to working pensioners who will receive an increase in their retirement benefits based on their employment term and the size of salary.

National budget 2021, pensions

On December 15, 2020, the Verkhovna Rada, Ukraine's parliament, passed the country's budget for 2021.

On the same day, Finance Minister Serhiy Marchenko, while commenting on a question from a lawmaker about cutting the Pension Fund's expenses by UAH 8 billion (US$286 million) in preparation for the budget's second reading, said there were enough funds in the 2021 budget to cover pension payments.

Read alsoUkraine's Pension Fund reports on income since year's startPensions are to be increased by 11% as of March 1, 2021. In April, payments to pension-age citizens who are still working are to be automatically recalculated, taking into account the amount of salaries or wages, as well as overall duration of service.

Starting from January 1, 2021, Ukraine has increased pensions for certain categories of pensioners. In particular, pensions have risen by UAH 300 (US$10.73), to UAH 2,400 (US$86), for those who are over 65 years old and whose employment term is 30 years for women and 35 years for men. This rise is pegged to the minimum wage, which will be increased for the second time on December 1, 2021, and accordingly, pensions for that category of pensioners will grow again, from UAH 2,400 (US$86), to UAH 2,600 (US$93).

On January 27, the Cabinet of Ministers approved a bill on indexing pensions for all pensioners as of 2022. The draft is to be submitted to parliament for consideration.

On February 17, 2021, the Cabinet approved the budget of the country's Pension Fund for 2021.

In addition, in 2021, Ukraine will see the minimum pension grow twice (by 9.3% in total) along with the growth of the living wage for persons who have lost their ability to work.