The legislative package on pension reform approved by the Verkhovna Rada of Ukraine on July 09, 2003 legislatively stipulates a new three-level pension system as of 01.01.2004.
1 and 2 levels – Law of Ukraine “On Compulsory State Pension Insurance”.
3 level – Law of Ukraine “On Non-Governmental Pension Provision”.
Level’s specifics:
| Level | Type | Pension type | ||||
| 1 | Compulsory, sole | Basic pension | ||||
| 2 | Compulsory, accumulative | Retirement pension | ||||
| 3 | Voluntary, accumulative | Retirement pension |
Previously declared by the Cabinet of Ministers and legislatively supported 3-level pension system eliminates the discrimination in pension provision of the population with different levels of income during the work period and prevents limiting the maximum amount of pension payments.
First level is represented by the Pension Fund of Ukraine which will continue to perform the distribution function, thus being sole. State pension is referred to as basic. The amount thereof is calculated on the basis of mandatory work record scale for different pension levels and on the basis of the data on citizens’ wages for each continuous 5 years of the work period.
Second levelis accumulative, thus being centrally allocated. The main subject thereof is the State Accumulative Pension Fund where a part of compulsory pension deductions are planned to be allocated (supposedly 7%). The amount of this part of the pension will be determined not by the wage level received during this or that period, yet by the de facto accumulated in the personal account amount which is the property of its owner.
Third
level
isalsoaccumulative. Itsmainfeatureisthatitisfullyvoluntary. Subjects of the market permitted to render this service are represented by insurance companies, commercial banks and nongovernmental pension funds.
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