Will current 40-year-old Ukrainians have the right to retire?

Military actions, dependence of the economy on international support, reduction of the population - the main source of filling the Pension Fund of Ukraine. All this has a direct impact on the size of the pension, which today is not enough even for the most basic necessities. But economists are especially worried about the further development of the pension problem. After all, if with such difficulty it is possible to provide for the current generation of elderly people, what will happen in the foreseeable future? And won't it turn out that the current 40-year-olds will no longer have to rely on pension payments?

However, no matter how difficult the situation with pension provision and socio-economic development in general may look, everything is not so hopeless. The processes that are taking place in society today show that the country has the potential for positive changes. But let's talk about everything in order.

There are not enough people

Our publication has told a lot about the difficult life of Ukrainian pensioners. Before the war, millions of grandparents lived below the poverty line. And today, due to rising prices for food and medicines, the situation is even worse. One of the main reasons for low pensions is the difficulties faced today by the familiar solidarity system of compulsory state pension insurance (the first tier system). The system depends on the number of working citizens who pay the Unified Social Contribution to the obligatory state social insurance (USI). If the number of working people decreases, the contributions to the Pension Fund decrease. As a result, it needs to be supplemented from the budget, which is not so easy in today's conditions.

Ludmyla Cherenko, a senior researcher and a candidate of economic sciences at the Ptukha Institute for Demography and Social Research of the National Academy of Sciences of Ukraine, believes that the Pension Fund will continue to decline. And this, in her opinion, is an objective process.

Working Ukrainians cannot give even more money in the form of tax to provide a decent pension for the current generation of pensioners. Even if in the future we will overcome the shameful shadow incomes, and they will have minimal scale, even in this case the system will not be able to ensure the level of pension payments. The pension fund constantly has a hole, which is compensated from other deductions," she told Socialportal.

Eventually, the expert believes, the process will reach a critical point, at which the system will not be able to work according to the same rules.

Let's make a comparison. In 2023, the budget revenues of the Pension Fund of Ukraine are determined in the amount of 768 billion UAH, of which 451 billion UAH (59%) - own revenues, noted on the website of the PF. In 2022, the own income of the PF was 65.1%. That is, the deficit is increasing. And one of the main reasons is the low number of working young generation. As noted in the Ministry of Social Policy of Ukraine, the solidarity pension system can work well if contributions pay at least twice as many people as receive pensions.

At the beginning of summer, the number of pensioners in the country was 10.5 million people. The number of the working population today is only slightly higher. Oleksiy Miroshnichenko, president of the Confederation of Employers of Ukraine, estimates that before the war there were about 17 million able-bodied citizens in the country. However, in 2023 there were 4.6 million citizens outside Ukraine, of whom 3.2 million were women of working age. In the territories occupied by the enemy since the beginning of 2022 there were 3 million people, of whom an estimated 1.3 million were of working age. To this we should add one million mobilised Ukrainians. Thus, in 2022 - 2023 the country lost 5.5 million able-bodied citizens. The expert wrote about this in a column for "Economic Pravda". And this we did not take into account the number of unemployed, which, according to estimates of the National Bank of Ukraine, is 26%. As well as those who work unofficially and do not pay the unified social tax.

No better has been invented yet

Demographic difficulties show that the solidarity pension system, created to provide for the basic needs of pensioners and the social protection of every citizen, is gradually ceasing to fulfil its purpose. According to the Convention of the International Labour Organization, which Ukraine has ratified, the pension should be at least 40% of the salary. But, according to forecasts of the Ministry of Labour, due to demographic changes, the level of replacement of earnings by pensions from the solidarity level will fall to 18%-20%.

Lyudmila Cherenko also believes that if the situation does not change, then under the conditions of the solidarity pension system it will be necessary to either significantly raise the retirement age or permanently reduce the level of pension payments.

According to Maria Repko, deputy executive director of the Centre for Economic Strategy, the solidarity pension system will still remain in one form or another.

Even if there is just a budgetary payment, it will still look like that people who work will pay taxes. And those who cannot work due to their age will receive a pension. In principle, another alternative in the interval of the development of society has not yet been invented, - she commented to our edition.

We would like to add that Ukraine's widely announced transition to the second tier of the pension system is also postponed at least until the war is over. This is stated in the published updated memorandum with the International Monetary Fund signed by the Ukrainian side. Paragraph 33 notes that IMF representatives believe that the Ukrainian government's attention should be focused on strengthening the first tier of the pension system "to ensure that it remains rules-based and financially viable, especially after the end of the war".

Prospects for future pensioners

If the situation with the support of current pensioners can be solved, what future awaits those who will retire in 20 years?

Accumulation system. The government has long and persistently argued about the need for a funded pension, the so-called second level of pension provision. The essence of the system is that it is proposed to charge monthly additional insurance contributions from the salaries of citizens, which will be directed to the Accumulation Fund. And which only after dozens of years will be able to return the money in the form of pensions. However, the experts we interviewed are sceptical about this approach.

Economist and political technologist Vsevolod Stepanyuk believes that the accumulation system is possible when a person has surplus money to accumulate. The state should have mechanisms to multiply the accumulated funds.

Do we have a place to invest money to multiply it? The answer is no. Besides, the hryvnia is not an investment currency. In order to invest in hryvnia, foreign economic contracts must also be serviced in hryvnia. If you want to buy our grain, you have to pay us in hryvnia, not in dollars and euros. I believe that no savings system will work for us," he told Socialportal.

The expert also believes that the accumulation system is beneficial primarily to the financial sector, which will be able to use the funds that a person will use in 20-30 years.

Take care of yourself. Maria Repko believes that today's 40-year-olds should already think about their provision in old age. It is necessary to save so much money that after the age of 65 a person can almost not work. But how to do it? Economists name such options as deposits, purchase of securities, investment in real estate. However, will these traditional approaches to investing be possible in the conditions of economic instability that Ukraine is facing?

Emigration. Many Ukrainians see emigration abroad as one of the ways to provide a decent life for themselves and their children. Today, most of our compatriots have moved to countries near and far abroad, as well as to the American continent, mainly to Canada. Social security abroad is indeed better than in Ukraine. But, will the situation be the same in the long term? It should be noted that in many prosperous countries of Western Europe in recent years there have been negative socio-economic changes. Prices for utilities, food, medical care, rent, etc. have risen and continue to rise. And no one can predict how the situation will develop in 5-10 years. Therefore, emigration to another country for a better life is a very controversial issue.

Kinship care. Some experts suggest looking at the experience of Asian countries, where older people are often cared for not only by relatives but also by neighbours. Uzbekistan is cited as an example. In this country there is a whole system of relations between residents of one neighbourhood - makhalla. Younger and working citizens provide material and financial assistance to elderly people. Is something similar possible in Ukraine? Lyudmyla Cherenko doubts it.

Even in Soviet times people in our country strived for individualism. And nowadays young people try to live separately from their parents. The same applies to the elderly. It is psychologically difficult for a person of age to become a burden for his relatives. Especially those who do not have children of their own," she said.

We can cite other examples of solutions to the pension issue, but the main thing, in our opinion, remains one - the priorities of the state itself. If for many years to promote the interests of big business, and the social sphere is financed on a residual principle, then no reforms will not help to reverse the situation. Unfortunately, this is what happened in Ukraine, and it is still happening today. It is not noticeable that the state has a holistic concept of social sector development. There are some reforms that work as long as their ideological inspirers are in their positions. In general, the social sphere in the country has been financed just enough to cover basic human needs. And, on the contrary, the social sphere is the first to go under the knife when it is necessary to save budget funds. After all, socially vulnerable and unprotected categories of the population, including pensioners, will not organise protests.

Yes, the situation in the country is difficult. The budget is largely dependent on international support. At the same time, we do not hear any statements about social transformations that the state is going to initiate after the war. And what a motivating effect this would have on the population! However, not everything is so bad. There are positive processes that allow us to say that the country has prospects for the future. And these processes are taking place today in the people themselves.

A sense of responsibility

The war brought death and destruction to Ukraine. At the same time, it revealed the best sides of the population - the sense of mutual assistance. This is especially noticeable in the frontline regions, where many citizens are forced to literally survive. In such difficult conditions, people's priorities in life change somewhat, respect for human beings and desire to provide support increases. Manifestations of humanity can also be found among the representatives of the authorities - the same local residents. Today, there are many people among local administrations who provide support, guided not by job descriptions, but by conscience and responsibility. Even at the risk of their lives. This shows that fair support to people is provided not only at the individual level, but also at the system level, even if it is still local.

As an example, let's take the village of Pribugskoye in the Galitsynivka United Territorial Community (UTC) in Mykolayiv Oblast. From March to November last year, this village was under daily shelling, as the front line was two to three kilometres away. Only 25 people out of 1.5 thousand inhabitants remained in the village. The rest had left. But even in difficult conditions people continued to receive food, water and medicines. The delivery of humanitarian aid was undertaken by the 50-year-old local headman Sergei Aldabaev.

Together with several like-minded people, the man delivered everything they needed directly to their homes. He says that this was safer for his fellow villagers than setting up a distribution point for humanitarian aid in conditions of daily shelling. At the same time, the man put his life at risk, as he had to go round the whole village to deliver aid. And shelling always starts suddenly.

We travelled two at a time so that one person could help in case of injury. Together with me, one of the locals or our neighbourhood policeman would deliver food. Was it scary? Yes. I have a family myself: a wife, two children. But you can't show your fears to people. We put on bulletproof vests and hit the road," Sergei told Socialportal.

In addition to the headman of Pribugskyi, the leadership of the settlement community, heads of departments, other headmen took part in helping the residents of the UTO. This, according to Sergei Aldabaev, ultimately helped to maintain management and coordination.

You know, people always complain about the authorities, saying that there are only crooks sitting there. But whatever you say, we all thought for the people at that time, to deliver water and food on time. So that our compatriots would not feel abandoned, - concluded the head of the village.

We emphasise that the Galitsinovo territorial community is not the only positive example. Similar things happened in Pervomayskaya TEC in the villages of Partizanske, Novonikolayevka, Kiselevka, where the headmen also stayed together with their fellow villagers and did their best to help people. Our journalists also communicated with them. Assistance was organised in the same way in the villages of Chkalivka settlement military administration in Kharkiv region. And in many other settlements. And today local administrations have to solve many tasks with limited resources. And much can be done thanks to attentive attitude to people's problems. After all, only those will understand the needs of the people, who on personal experience faced the same difficulties.

In conclusion, I would like to note that difficult socio-economic conditions provide opportunities to develop effective mechanisms to support the population. And today there are many people who are ready to selflessly fulfil their public duty. This testifies to the high potential of our society. Its growing need to build a system in which pensioners, people with disabilities and other socially vulnerable citizens could have real support.