Oleksandr Tkach: We are no worse than Europeans. The logic of social reforms should also be based on this

Oleksandr Tkach

What awaits the Ukrainian pension system after the war? How has it changed over the decades? Why does the solidarity model no longer guarantee anything? Who and what should Ukraine focus on in the modernization of this sphere? About this and other things Newsky said an expert on pension systems, candidate of technical sciences, associate professor Oleksandr Tkach.

Currently, BP is discussing another project to launch a storage facility pension systems. It seems earlier already was a lot attempts to create this "level" of the system pension provision - why it did not succeed, or perhaps something did succeed, but the "institutional memory"?

In short, populism always trumps common sense. The effect of the so-called "pension increase" during one to three years of the term of office of the prime minister or president is much higher than that of long-term savings, which is formed over decades. All that has been achieved in 25 years, if we count from the beginning of the reform of the pension system, announced by the Decree of the President of Ukraine dated 14.04.1998, is the adoption in 2003 of two laws defining the transition to a three-level pension system. And if something is constantly happening with the first level (solidarity pension system) (at least the "rules of the game" are changing) with the third level (voluntary accumulative system of non-state pension provision) - also (almost 50 non-state pension funds are currently operating), then the second level (both compulsory accumulative pension system) was never created.

So, from 2007 to 2023 there were more than 10 different bills. The most effective and economical for the start was the deputy draft law No. 6677, registered in the last term of the parliament. According to it, the second level was to start on the basis of non-state pension funds from 01.01.2019. But neither the then composition of the parliament nor the government did anything for this. What's more, they inhibited this process with their inaction.

In your opinion, is the joint pension system viable in Ukraine today? After all, it was created almost a hundred years ago and was designed for another demography and the structure of the economy. Is it normal that PF every year subsidized from the budget for gigantic amounts (that is, whether it has the pension system should ideally be self-supportingмuvana)?

The solidarity pension system has long ceased to fulfill its function of "solidarity of workers and pensioners". Even before the war, every second hryvnia of pension payments was subsidized. Given the constant reduction of workers and contributors in Ukraine (namely, they finance payments to current pensioners), the system is becoming inefficient. In order for the solidarity system to become effective, it is necessary to have a ratio of the number of employees (payers of contributions) to the number of pensioners of 5 to 1 or to increase the contribution rates from the current (almost 19%) to 40%. Both ways are unrealistic neither during the war nor after its end.

Since the beginning of the 2010s, there have been at least two "adjustments" (it can hardly be called reforms) of the existing pension system (conditionally "under Tyhipko" and "under Groysman"). How do you evaluate them, probably, it was just "cost optimization"?  

I completely agree with the term "cost optimization". Insignificant achievements in saving money due to such "innovations" as raising the retirement age for women, limiting the maximum amount of pensions, including military ones (2012), increasing the length of service required for retirement at 60, deprivation of pensions for seniority of railway workers, teachers (2017), did not have the expected effect. Replacement of lost earnings with a pension (and this is a criterion for the effectiveness of the pension system) fell from 38% to 28%, and the PFU deficit continues to grow. To be very brief about the Groisman-Reva reform, there was a "sequestration of the state pension program" covered by the slogan "fair pension reform".

In plain words: you will have to work longer, retire later, and receive less pensions (both in terms of life expectancy in retirement and in terms of size/purchasing power).

It seems obvious that already in the first year winy українська economy (which is at least "white"), in that the form in which it actually existed in 2014-2022 destroyed (perhaps you have a different opinion?). This, however, creates a certain possibility for the implementation of some ideas of reorganization of the social sphere "from scratch" (is it impossible in principle?)?

Thus, the end of the war provides a chance to reform the pension system on other grounds. If we carefully look at the world pension history from the middle of the 19th century to the present day, we will see that after the end of each major war, pension reforms began.

This is not only Germany during Bismarck's time, these are pension funds after the end of the Crimean War, these are the first pension funds in the Netherlands after the end of the First World War, this is the development of pension systems in the Netherlands, Finland after the end of the Second World War, these are accumulative pension systems in the countries of Eastern and Central Europe the end of the Cold War, this is the new pension system of Israel after the conclusion of peace agreements, etc. Most of the innovations related to accumulative pensions, which were formed in pension funds and pension funds on professional, corporate, and municipal grounds.

The example of Finland gives us a lot of useful information for the study of two latent functions of social policy:

1) the role of the accumulative pension system in the formation of a unified nation after an exhausting war; and

2) investment of pension funds in national development projects.

In addition, the accumulation of funds in individual pension accounts, which was started back in 1937, is of considerable interest. These funds were used for electrification of the country. It was important to create municipal pension systems that invested pension funds in housing construction, which led to an increase in the share of the urban population.

I would like to focus on two issues separately.

To win this war and restore the economy, Ukraine needs:

• A motivated professional army;
• Motivated skilled workforce.

It is not for nothing that the reform of the pension system began in Israel precisely with the introduction of accumulative pensions for the military in 2003. This system was introduced on the basis of non-state pension funds. They started with 1%. Gradually increased to 7%. And no one created a government fund for this. Therefore, this experience and this issue are relevant for us. We proposed to start such a system for the officers of the Armed Forces. FIRST! Now life itself puts this question on the agenda.

The motivation of qualified personnel in economic sectors should be carried out:

• By commemorating the merits of those workers who made a significant contribution to our resilience and our victory, especially in the first months of the war;
• Through the development of accumulative pension systems of enterprises, industries, cities and regions.

It is not only about the military, it should also be about the railway workers who evacuated our future labor potential.

In short, the end of the war provides a chance for the creation and development of professional, corporate, municipal and regional pension systems based on non-state pension funds created with the participation of employers and trade unions. With minimal intervention of government funds and state institutions in these processes.

From pension systems existing in developed countries (though not exclusively). provision (social insurance) that Ukraine could take as a model, are we in a unique situation situation?

We are not in a "unique situation". We are neither better nor worse than all Europeans. We need to do not what "rich countries" do with pension systems today, but what they did with pension systems when they were "poor countries". Moreover, we have all the institutional components for this – from non-state pension funds with relevant service providers to insurance companies and state regulators. With the best IT solutions and conscientious employees. How selflessly the administrators of these funds work in the conditions of war is a separate topic and respect.

There are many examples - from the Netherlands, Finland, Lithuania, Poland to the Netherlands, Israel and Australia.

As an ideal - the Netherlands, as a model for the start, then Lithuania or Israel.

Let me explain about Lithuania - we are in the same "mental" and historical space with Lithuania and Poland ("the new Polish-Lithuanian Commonwealth"), which are among our "lawyers" in the EU and NATO. Therefore, the harmonization of accumulative pension systems also makes sense. As for Israel, the "militarism" of Ukraine in the coming decades gives reason to think about the experience of this country. I have already mentioned the Finnish experience - just after the Second World War, the development of savings began.

The only thing that should not be done is to create another government pension fund.

As the successful experience of EU countries has shown, no government fund is required for the second level. And no state-owned companies. Since 2004. What prevents us from doing the same from 2024? There would be a desire. But for now we see a desire to create "additions" and "regulations". With the money of grants and taxpayers. And so for 20 years. Well, someone really wants to copy for Ukraine the state funds of three "democracies" - the Russian Federation and two other former Soviet republics. Freedom and choice, for which our people are fighting, should be in everything. This also applies to the accumulation of pensions. We should not repeat the "retirement path" of the Russian Federation and some Asian countries. Because that's for sure, not the EU. Promises that one day Ukrainians will be given the right to choose their pension fund are worthless. After all, it has been proven that "democracy does not happen afterwards."

Communicated Maxim Mikhailenko, editor-in-chief Newsky