Krasnova A.I., Tsarenko I.O.

Ukraine

FORMATION AND PROSPECTS OF PENSION SYSTEM IN UKRAINE

At the modern stage of the development of Ukraine the necessity of reforming pension system is caused by a number of factors, such as: economic, demographic, social. Nowadays this problem is especially actual in many countries of the world, and Ukraine in particular, irrespective of the level of economic development and complicated economic situation.

Since 2004, a new pension system of Ukraine provides three levels. The first is solidary system of obligatory state pension insurance. This system is based on the principles of solidarity and subsidizing, that is payments of pensions and granting of social services are carried out at the expense of State means. The second level is cumulative system of obligatory state pension insurance. This principle is based on accumulation of taxes of the insured persons in Comulative fund. Payments from Comulative fund will be carried out in addition to obligatory pension payments. The third level is system of not state provision of pensions. This system is based on principles of voluntary participation of citizens, employers and their associations in formation of pension accumulation for reception by citizens of additional pension payments at the expense of deductions on not state provision of pensions and the investment income added on pension assets.

Comparing all factors it is necessary to point out that demographic factor is of great importance nowadays in Ukraine. Society is threatened by the demographic level of life (LDL) or in other words there is the tendency of changes in dynamics of pensioners per one employee. It can be observed in the following figure:

Figure 1. The tendency of changes in dynamics of pensioners per one employee during 1997 – 2026 years.

The basic theoretical principles of reforms are stated in works of foreign scientists and experts, such as R.Agun, E.Endrjus, R.Rofman, M.Rutkovskiy, E.Fultu and others.

Moreover the executive and legislative branches of power electing and forming a new model of the pension system preliminarily have analyzed accumulated world experience of other countries and as the result followed eventually Russian-polish model of the pension system ( Look Table 1).

Table 1

STRATEGIES AND MODELS IN PENSION INSURANCE

STRATEGY	Model	Level Of pension system
		1	2	3
united	Soviet	state pension (united)	-	-
united-comulative	Russian-polish	state pension	The compulsory insurance	accumulated (laboring, personal)
comulative-united	American	state pension (united)	working (laboring)	accumulated (personal)
	German	state pension (united)	working (laboring)	accumulated (personal)
conditionally- comulative	Japan	basic pension	Additional sate and laboring	-
comulative	Chilies	compulsory accumulated pension	The compulsory insurance (3%)	-
	Kazakhstan	compulsory accumulated pension in state pension fund	Voluntary accumulated pension	-

We should mention that positive aspect of a new model of Ukrainian pension insurance will be the right to inherit pension insurance.

The model should consider risk factors connected with changes in a demographic situation (which is close to sensitive solidary system) and with fluctuations in economy and in the market of capitals (that is more like cumulative system).

The existing Ukrainian pension system still maintains many features of the former Soviet system and has some essential disadvantages that make its effective functioning under present conditions impossible. The conservation of this system will lead to series of negative consequences, including: deterioration of the living standards of pensioners; the necessity of a further increase in social security taxes, and, as a result, the growth of expenses for the labor force, reduction of the labor market, and an increase of the informal sector in the economy; to increase budget expenses for the pension system, and, as a result, an increase of the budget deficit, and a reduction of budget expenditures in other spheres such as health care, science, and education, which will lead to a deceleration of economic growth; the aggravation of the generations conflict.

Thus, there is a necessity to undertake pension reform in Ukraine. The introduction of insurance principles to the system would solve, at least partially, the abovementioned problems.