The Verkhovna Rada, Ukraine’s parliament, passed the law on pension reform by 288 votes on Oct. 3.
The law was introduced by Ukraine’s Prime Minister Volodymyr Groysman.
The reform of the country’s ineffective pension system has been one of the key demands by the International Monetary Fund for Ukraine to receive the $8.4 billion tranche as a part of its $17.5 billion loan program.
While the IMF has been demanding that Ukraine raises the retirement age to 63 years in order to help cut the pensions burden, the new law leaves the age at 60 for men and 58 for women.
However, the minimal work experience for getting a pension is raised from 15 years to 25 years, and to 35 years by 2028, which experts call a hidden increase of pension age.
Apart from that, the new law links existing pensions to the current average wage, meaning that the pensions that were assigned years ago will be raised.
Before the law was passed, retirement pensions were calculated as a share of the average wage that the pensioner used to make while in the workforce, but they didn’t include the inflation rates.
But some are unhappy with the law.
Lawmaker Olena Sotnyk says that “it’s not a reform.”
“It is a mechanical modernization of pensions,” Sotnyk told the Kyiv Post.
Sotnyk says that modern pensioners will win from this law, however, the future ones will not.
“Because of the new demand of 35 years of experience many people might not make it to their retirement pension,” she said.
Sotnyk believes that the real goals of the reform are to reduce the deficit of the Pension Fund of Ukraine and reduce the number of pensioners.
Vitalii Melnychuk, the expert at Reanimation Package of Reforms, in his op-ed for Novoe Vremya online magazine on Oct. 3 said that IMF has some concerns about the law.
According to Melnychuk, IMF is concerned about the pension raise for unemployed people as it will demotivate others to work and pay taxes.
Apart from that, Melnychuk said that IMF warned Ukraine against counting the years in college as work experience.
Volodymyr Dubrovskiy, senior economist at CASE Ukraine says that “it’s not a reform that should be implemented in Ukraine.”
“It doesn’t change the pay-as-you-go system that we have. Such a pension reform won’t be effective considering the demography in Ukraine. It can only be effective in a country where every next generation is more numerous and wealthier than the previous one,” he said.
Mariana Onufryk of Institute for Social and Economic Research earlier told the Kyiv Post that the government’s plan is a “cosmetic reform,” as it adds minor changes to the existing pension system, which is outmoded and needs overhauling.
