The process of pension reform in Ukraine should begin by July 2025. The Ukrainian authorities plan to submit changes to the pension legislation to the parliament by the end of March 2025. This is stated in the updated Memorandum with the IMF.
We will remind, in the Cabinet of Ministers on December 23 reported, that Ukraine received a budget tranche from the IMF of about 1,1 billion US dollars, and the following measures that Ukraine will have to take are defined in the joint Memorandum of Ukraine and the IMF on economic and financial policy.
"The authorities will start a pension reform process by July 2025, through which they aim to introduce a system that is sustainable and compatible with EU law, reduce the number of special pension arrangements and reduce the legal risks associated with the current complex pension system" - specified in the document.
Yes, one of the problems planned to be solved is the complexity of the pension system:
"The vagueness of the law has led to numerous court cases with negative consequences for the budget. In order to achieve greater legal certainty and avoid additional pressure on pension costs caused by legislative ambiguity, we will submit to Parliament by the end of March 2025 legislative changes to ensure the immediate entry into force of Article 5(61) of Law 3354 and new amendments prohibiting any changes in the pension system due to unrelated laws. We will also focus on consolidating the provisions of the pension legislation to replace various sectoral legislative acts that regulate pension rights" - says the Memorandum.
Thus, the Ukrainian authorities indicate that, with the help of the World Bank team, they are preparing changes to the pension system and support mechanisms for vulnerable segments of the population.
Namely, over the next few years, work will be carried out on a comprehensive conceptual framework for improving and simplifying the pension system and introducing the second level of the pension scheme "when the conditions for this are created."
"We repeat that any proposed legislative changes that will lead to an increase in pension expenditures must be accompanied by a medium-term analysis of fiscal and debt sustainability, as well as a clear definition of the necessary resources in changes to the budget of the Pension Fund of Ukraine" — the document says.
Ukraine undertakes to refrain from:
- introduction of new special pensions or benefits;
- the adoption of any new legislation that would result in the creation of additional contingent liabilities related to the pension that are not secured by financial resources;
- and refrain from changes that would lead to a decrease in the statutory retirement age.
"In the near future, we will take measures to limit the amount of additional payments to certain categories of pensioners, in addition to the contribution to the pension. We will also propose a unified approach to the annual increase of all pensions assigned in the pension system, exclusively through the indexation mechanism. In addition, we will improve targeting and prevent abuse of certain pension supplements by clarifying eligibility criteria." — notes the Ukrainian side.
Also, the Ukrainian authorities undertook to work on the future "strengthening targeting and verification of the financial situation of socially vulnerable sections of the population."
In addition, the option of combining various social assistance programs into a single package, taking into account individual needs, is being studied. "In this context, we have also raised the income threshold to qualify for the guaranteed minimum income program," the document said.
We will also remind that in the updated Memorandum with the IMF, Ukraine indicates the need to change the Code of Criminal Procedure and cancel the mandatory closure of the pre-trial investigation in connection with the expiration of its terms after notifying the person of suspicion.
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