On 1 April 2016, the National Bank of Ukraine hosted a working meeting between representatives of the NBU, the Ministry of Social Policy of Ukraine, the Pension Fund of Ukraine and the National Commission for the State Regulation of Financial Services Markets. 

NBU representatives at the meeting included NBU Governor, Ms Valeria Gontareva, and her Deputy Governors, Mr Yakiv Smolii, Ms Kateryna Rozhkova  and Mr Dmytro Sologub.

Mr Pavlo Rozenko represented the Ministry of Social Policy at the meeting. The Pension Fund of Ukraine was represented at the meeting by Board Chairman Mr Oleksii Zarudnyi. The meeting also featured Deputy Finance Minister Mr Roman Kachur and Head of the National Commission for the State Regulation of Financial Services Markets Mr Ihor Pashko.

Ms Gontareva underlined that it is in the interests of the NBU for Ukraine to succeed in implementing pension reform.

“Pension insurance reform is a complicated process that will bring about changes to both pay-as-you-go and defined contribution pension schemes. The reform should not be limited to raising the retirement age.  It's high time for Ukraine to shift to a defined contribution pension scheme.  For its part, the NBU stands ready to assist the Ministry of Social Policy in moving forward this process,” said Ms Gontareva.

Mr Rozenko backed the proposal put forward by the NBU, recommending that all stakeholders build a common vision for reforms, adding that there are no major divisions among the meeting participants regarding their stance on the reform process. 

Mr Rozenko also said that raising the retirement age is inappropriate at the moment and  that discussions surrounding this issue should not block the adoption of the defined-contribution pension scheme. “We are lagging behind in implementing pension reform as plans to implement a defined-contribution pension scheme were announced 15 years ago and were reflected in Ukrainian laws. However, political uncertainty over this issue has put this process on hold,” underlined Mr Rozenko.

 Additionally, the meeting participants also explored the possibility of using the national payment system PROSTIR for disbursing social payments.

For reference

According to the Law of Ukraine On Mandatory State Pension Insurance, the Ukrainian pension system shall comprise three pillars:

First pillar –   the solidarity system of the mandatory state pension insurance financed on a pay-as-you-go basis.  Under this scheme, pensions shall be paid from the Pension Fund of Ukraine.  The size of pensions depends on the size of salaries paid to employees over the career and the length of their insurance record.

Second pillar –  the mandatory state defined contribution pension insurance scheme, which has not been implemented in Ukraine.  Under this scheme, insured individuals’ contributions are accumulated in the Accumulation Fund and individual pension accounts.  These funds are invested in the economy to earn a return on investments. At the same time,  these accumulated funds (pension savings) are citizens' property and pension payments are paid from the Accumulation Fund and complement mandatory pension payments.

Third Pillar – the non-state pension system is established on a voluntary basis, with non-state pension funds, insurance companies and banks providing pension services to Ukrainian citizens. The size of pension payments depends on the size of contributions, the period over which these contributions have been accumulated and returns on investments. These payments are paid out irrespective of mandatory pension payments.