Members of parliament largely ignored the more than 1, 000 corrections that oppositionists and labor unions proposed.
In the early morning of July 8, lawmakers finally approved controversial new pension legislation that will raise the pension age for women and could help Ukraine secure additional International Monetary Fund bailout loans.
Pension reform legislation approval came after nine hours of debate, during which lawmakers refused to include the majority of over 1,000 corrections suggested mostly by oppositionists.
The provisions of the legislation – including raising the retirement age for women from 55 to 60 – could help the government seal the next tranche of its $15 billion credit from the IMF.
But experts say that pension reform alone is not enough to unfreeze billion-dollar IMF loans that are needed to patch up Ukraine’s stretched finances.
The government will probably also have to further increase utility prices for households after hiking natural gas prices 50 percent last summer.
The provisions of the legislation – including raising the retirement age for women from 55 to 60 – could help the government seal the next tranche of its $15 billion credit from the IMF.
Nevertheless, if President Viktor Yanukovych signs the law, the new pension rules will take effect on Sept. 1.
Many aspects of the law proved unpopular, sparking protests on the day the debate in parliament began, on July 7.
But economists said the changes were necessary to shore up state finances.
Deputy Prime Minister Sergiy Tigipko said the legislation had been agreed with the IMF. “It is the only way to ensure pensions will increase in the future,” he added.
The more than 13 million pensioners in Ukraine account for almost one-third of the population against 20 million working people.
The average pension is Hr 1,122 ($140) per month, but many pensioners, particularly those who worked in certain state roles, receive much larger sums.
Critics say the new pension legislation is unfair and inhumane in raising retirement ages in a country with a relatively low life expectancy.
It increases retirement ages for women from 55 to 60.
When you raise the retirement age and years people will work, where will Ukrainian youth go to work? – Arseniy Yatsenyuk, opposition lawmaker.
The age will be raised by six months every year for the next 10 years.
Ukrainians will also have to work 10 years longer to receive full pensions: men 35 years and women 30.
“European experience shows that the average life expectancy in European Union countries is 10-12 years higher [than in Ukraine],” opposition lawmaker Arseniy Yatsenyuk told parliament during the debate.
“When you raise the retirement age and years people will work, where will Ukrainian youth go to work?”
In the past, additional years of work gained retirees extra credit, resulting in a higher pension. Now extra years of work will be mandatory.
The maximum amount of salary that can be taxed for contributions to the pension fund was also limited to Hr 14,400.
Top earners will not have to contribute above that level, which is fifteen times the size of minimum wage in Ukraine.
The maximum pension that a typical Ukrainian can receive was set at 10 times the living wage of a disabled person per month, currently Hr 7,640, or just under $1,000. Before, there was no restriction.
The lawmakers, however, decided not to extend the provisions to themselves, instead leaving their pension at 80-90 percent of the monthly salary of a deputy, or over Hr 15,000.
State officials were hit hard by the pension reform.
Previously, prosecutors, judges and scientists had received pensions according to special laws.
Top earners will not have to contribute above that level, which is fifteen times the size of minimum wage in Ukraine.
State officials will now enter mandatory retirement at 62, although they will be eligible for pensions from 60.
Pensions will be paid out at 80 percent of salary, rather than the current 90 percent, although that change won’t affect workers in prosecutors’ offices.
The question now is whether President Yanukovych will sign the bill into law.
Amid falling ratings, he could look to increase his popularity by vetoing the unpopular bill, although this would hamper negotiations with the IMF over further loans.
The opposition has pledged to take the fight to the Constitutional Court.
Analysts, however, give them little chance of success. The court can rule only on certain provisions, rather than the document as a whole. In any case, the court is seen as being loyal to the president, they say.
Kyiv Post staff writer Maria Shamota can be reached at [email protected]
