16 February 2011, 11:54
Comprehensive pension reform will help reduce the shortfall in the pension fund.
This statement is made in the article "Comprehensive Pension Reform Progressive Country" by Volodymyr Lytvyn, Chairman of The Verkhovna Rada of Ukraine, published in the Holos Ukrainy newspaper on February 16.
According to the statistical data, there are 18,3 million of the employed and 13,7 million of the pensioners in Ukraine, i.e. there are 100 pension fee payers for 88 pensioners. The state supports 1,5 million of the unemployed disabled; there are 0,5 million of the unemployed according to the official statistical data, while the number is actually much bigger. "Today, the pensioners make up 30% of the population, while the number of payers of a fee for compulsory pension insurance totals 31%. This correlation will not change in favour of the employed. Although the average pensions of the Ukrainians are low, the state needs for their payment in comparison with other payments are exorbitant," he stresses.
The Chairman of The Verkhovna Rada of Ukraine states that formation of a national Pension Fund engendered a persisting problem, namely, its growing shortfall covered by the State Budget. "The Pension Fund deficit is not merely a lack of funds. The Government makes the law-abiding taxpayers fund the payments to the unemployed twice. For the first time by the payment of all pension fees and charges on the salary. For the second time by the covering of the shortfall in the Pension Fund," the article reads.
According to V.Lytvyn, the effective solidary (state) system allows the Pension Fund to pay not more than 40% of the average salary. However, this correlation will total only 20-25% in comparison with the total amount of pension payments and the total salary (official salary together with the off-the-book payments).
The Head of the Parliament stressed that the receipts of the Pension Fund depended on the number of employees, their rate of salary, and the level of reporting real salaries. The share of pension expenditures of Ukraine currently exceeds 16% of the GDP, while this rate in economically developed countries is much lower.
Although the pension tax is rather high for the tax payers, the state Pension Fund always lacks its own means to cover the pension obligations. "The shortfall in the Pension Fund in 2010 totaled UAH 34,4 billion. Permanent deficits of the Fund are covered by the budget transfers, when the budgetary resources are withdrawn from the sectors of public health, culture, education and defense. The situation will aggravate, unless the urgent drastic measures are taken," the article reads.
V.Lytvyn reminds that the State Budget for 2011 covers the shortfall in the Pension Fund to UAH 17,8 billion. The transfer from the State Budget to the Pension Fund is reduced by UAH 6,5 billion, making up UAH 58,3 billion, which is another factor to promote the pension reform.
Actual changes in the pension system are due this year, so the budget of the Pension Fund should be balanced in the year 2012. "Still, the effective solidary system should urgently be supported by the savings system of pension insurance and the non-governmental pension plans," the Head of the Government stresses.
Implementing the pension reform, the state should fix the rates of salary or income deductions to the solidary pension fund, as well as the rate of minimum level subsistence that serves as a basis for the work solidary pension.
The Head of the Parliament supposes that introduction of a compulsory savings system of pension insurance should become another step towards the pension reform. If it is introduced, the funds will enter not the general account of the Pension Fund, but the personal savings accounts of the employed. "According to the calculations, the budget of the Pension Fund will not sustain losses, if the introduction of the second level of savings pension scheme is gradual. I mean the situation when the compulsory payments to the second level in the year of introduction will be made only by the persons who reached 35 years of age," the article reads.
Next year the circle of payers could be enlarged by another age group, until the entire working population is covered. "The speed of these proceedings should meet the economic capacity of the state, and then there will be no problems with the present-day pensioners," V.Lytvyn summed up.