Problematic aspects of the regulatory and legislative framework for calculating pensions in Ukraine

Abstract

Introduction. In order to further move towards the European Economic Area, Ukraine needs to take pension reform measures. Pension provision in Ukraine has to be profoundly reformed in terms of regulatory and legislative framework for calculating pensions in Ukraine. What is of particular importance is improving Ukraine’s laws and methods for calculation and pension payments to citizens. Another important focus of the reform agenda is to define categories of people eligible for old-age pensions, disability pensions, and long- service pensions.

Purpose. The purpose of the article is to interpret the regulatory and legislative framework for calculating pensions in Ukraine; to describe changes in pension payments before and after the reform was implemented; to highlight ways of improving pension payments in terms of regulations and legislation.

Methods. The research methods used in the article include: analysis; comparison; historical method to consider the legislative framework for calculating pensions at different periods of time.

Results. The regulatory and legal framework for calculating pensions in Ukraine is a complex system comprising the Constitution of Ukraine, the Laws of Ukraine, the Labour Code of Ukraine, decrees, Presidential decrees, International agreements and laws of the USSR. Some of these regulations and legislation need to be revised and amended in order to bring them in line with contemporary practices and modern standards.

It is claimed that since 2017, Ukraine’s government has been implementing the pension reform aimed at relieving the pressure on the working-age population and improving living standards for retired people. In particular, the retirement age has been raised, eligibility criteria for preferential pensions have been revised, and methods for calculating pensions have been changed.

The Ministry of Social Policy of Ukraine argues that the new pension reform is expected to enhance social, labour and post-retirement relations, to increase tax revenues through reporting real salaries, to develop a framework of social justice when calculating pensions. The author points out that the regulatory and legislative framework for calculating pensions is outdated at this stage and it requires changes. The considered changes are as follows: the establishment of a working group for entitlement of preferential pensions; the introduction of wage differentials by industries and occupations; the increase of pensions in line with inflation and age; the implementation of notional defined contribution pension system; the introduction of the new Labour Code and Pension Code, which are expected to regulate labour and post-retirement relations and meet modern standards.

It is also indicated that continued employment should be enforced by legislation and a system of granting advantages and social security benefits to those who retire later needs to be developed.

In terms of legislation, sufficient regard should be given to non-state pension schemes, defined contribution pension systems, and the principle of fairness when it comes to pension entitlements. It is also crucial to adjust pension amounts and retirement age to align with the sustainability ratio and the average life expectancy.

Discussion. Further research of regulatory and legal framework for calculating pensions in Ukraine should be focused on the development of the Pension Code and improvement of the existing laws relative to pension calculation and payment. The author also suggests differentiating minimum wages by industries and regions and countering the illicit labour market and campaigning against payments ‘in envelope’, because official wages are the basis for calculating pensions.