Experts of the Financial Sector and Pension System Reform group of the Reanimation Package of Reforms support the government initiative to reform the pay-as-you-go component of the pension system and call on the government and the parliament to continue their cooperation on the pension reform.
RPR experts approve of the regulation updating the first (pay-as-you-go) level incorporated in the government’s concept of the pension reform, in particular, with regard to the conditions of retirement, “modernization” of pensions, abolition of special pension preferences, mechanism of regular indexation of pensions, etc. However, they stress that it is full implementation of all the components of the defined contribution pension system that is key to the success of the reform as a whole.
Pension system shall include the following three levels equal in status and importance:
- the first level – the reformed pay-as-you-go pension system based on the principle that the amount of pension shall match the amount of pension contributions paid;
- the second level – a defined contribution system within the mandatory state pension insurance on the basis of individual pension accounts set up by individuals in non-state pension funds chosen at their own discretion;
- the third level – a voluntary system of non-state pension insurance.
In view of the above, experts of the Financial Sector and Pension System Reform group of the Reanimation Package of Reforms call on the government and the Verkhovna Rada to consider the following recommendations in the course of further implementation of the pension reform:
- to modernize the first level – pay-as-you-go – pension system;
- to introduce the second level pension system – defined contribution system within the mandatory state pension insurance (according to the road map developed in cooperation with the members of the expert community);
- to improve the existing mechanism of financing preferential pensions;
- to stimulate the development of the third level of the pension system including non-state pension provision and relevant financial institutions;
- to amend the effective legislation on the use of securities circulating outside Ukraine (including sovereign Eurobonds of Ukraine) to ensure that they are used by the subjects of the second and the third levels of the pension system;
- to facilitate the development of mechanisms and instruments for investing pension assets and hedging the risks associated with the fluctuation of the hryvnia exchange rate.