International Centre for Policy Studies
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June 09, 2011

Pension Reform

Ukraines pension system is currently ineffective because it does not match todays demographic, social, economic and political realities. Firstly, the pensionable age in Ukraine remains unchanged since 1928. In the intervening 80 plus years, life expectancy has gone from 45 to 69 years.

Ukraine is in an excellent position to transform pension reform from an unpopular move to a popular one. On one hand, there is extreme dissatisfaction among ordinary Ukrainians with the way the current system works, as most retirees get a miserable basic pension. On the other hand, the system has a deeply rooted contradiction that prevents it from functioning effectively: pensioners can continue to work and get a salary while getting a full pension, which the state covers at the expense of the working population. Eliminating this distortion along with introducing material incentives to postpone taking a pension benefit could reduce much of the negative social impact of raising the basic pensionable age.

Using public policy instruments such as identifying all stakeholders, engaging them in determining obstacles to reform and suitable policy decisions, establishing their positions, mobilizing the support of those who favor reform, and neutralizing those who oppose it makes it possible for the Government to choose the best configuration of pension reforms and to ensure public consensus around the need to carry it out.

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