The pension reform in Ukraine provides for a mandatory deduction of 9% from the salary for the accumulative pension. About this reported Minister of Social Policy Oksana Zholnovich.
These deductions will allow you to provide 20% of the average salary during your life in retirement. Another 20% will come from the solidarity system, which in total will provide a replacement rate of 40%. People may also voluntarily pay more in order to receive larger payments in the future.
“Pay voluntarily more, obviously, and the coverage will be greater. But this is already an opportunity for a person to independently regulate how much he will pay for savings, and then calculate his own percentage.” Zholnovich explained.
The official explained how the pension system works and what the replacement rate is:
“You and I earn some amount of money, for example 20 or 30 thousand. hryvnias during life, we average. And then from this amount we pay certain contributions in order to provide ourselves with some percentage of this amount in old age. Because it is clear that when you retire, your pension is not equal to your salary. The replacement rate is what percentage of paid contributions, of wages, we guarantee or want to guarantee for each person.”
Zholnovich also emphasized that the guarantee of 40% of average earnings is an important component of the solidarity system.
“This is a big guarantee, because if today you pay almost 19% directly to the pension fund from each salary, then a guarantee of 40% is an increase of twice this amount, it is a good guarantee, and it is defined by European regulations, and therefore we strive to get closer to it . Today, unfortunately, for the vast majority of pensioners, such coverage is only 28%. It’s not enough, we understand that and we’re thinking about how to raise it.” – added the minister.
