Ukraine’s pension system offers worst of both worlds: high taxes and low benefits
Ukraine’s state pension system not only overburdens the tax system – it also fails to offer retired Ukrainians a decent life after they leave the workforce.
Amid the ongoing discussions on the final version of tax reform, there is consensus on lowering the unified social tax on salaries from 41 to 20 percent to avoid widespread evasion. That’s the tax that feeds the ever-hungry pension fund.
“Of course this step will lead to a deficit of nearly Hr 100 billion in contributions to the pension fund. We plan to balance it with compensatory steps and a parametric reform of the pension system in the nearest future,” Finance Minister Natalie Jaresko wrote recently in an op-ed for Ukrainian online newspaper Ukrainska Pravda.
Twelve million retired Ukrainians – a quarter of the nation's population – receive pensions, even though they are not high enough to live on.