Pension reform, risks for young Ukrainians

Currently, deputies have proposed to introduce accumulative pension accounts. Namely, this is a bill (2683). It governs the procedure for accumulating workers’ pensions (who will make the payments) and on which accounts they should be kept.

According to the provisions of this bill, 1% will be deducted from the employee’s salary and 2% from the employer (only 3%), but if the employee wants to increase the amount to 4%, the employer will have to deduct 5% (this is the upper limit). Employers are dissatisfied with this norm, because, for example, it is not a lifting sum for the restaurant business.

But there is an exception – it is work with harmful and difficult conditions. For them, the employer must deduct 15% and 7%, respectively. These are good socially oriented payments. Currently, 2020 does not allow companies to pay funds in this amount.

As for the storage of money – it will not be credited to the accounts of the pension fund – but to the accounts of private funds that have passed special certification. These funds will have access to investments and will invest them in various projects. It should be noted that this is a common practice in Europe and investing in such funds is at a compound interest rate. It should also be noted that the bill does not guarantee the preservation of these deposits.

There are risks in such a system, namely:
Bankruptcy of companies and leaving without means of a working class is possible;
Interest rate of funds retention (does it cover inflation ?, is the rate a compound interest rate?);
Will these funds not be fraudulent?