Financial and demographic problems of pension provisioning in Ukraine

Shykina Nataliya
PhD in Economics, Assistant Professor of the Department of Finance, Odesa National Economic University, Odesa, Ukraine, E-mail:shykina_nataliya@ukr.net, ORCID ID: https://orcid.org/0009-0001-7996-2389

Cite this article:

Shykina N. (2024) Financial and demographic problems of pension provisioning in Ukraine. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Finansovi ta demohrafichni problemy pensiinoho zabezpechennia v Ukraini; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 5-6 (318-319), pp. 85-92.

Abstract

The inadequacy of the Pension Fund of Ukraine's own income, which for a long period of time is compensated by state budget funds, not only contributes to the increase in the state budget deficit, but also creates the prerequisites for the further search for alternatives to state pension provision and the development of the non-state pension insurance system, which in turn requires a higher level of income of Ukrainian citizens, as well as an increase in their level of financial literacy. This article examines the primary trends within Ukraine's solidarity pension system, highlighting the widening disparity between the Pension Fund of Ukraine's own income and the actual required funds, which are annually covered over an extended period through state budget allocations. The study aims to uncover the systemic causes of the Pension Fund's income insufficiency, prompting a search for alternatives to state pension provision and the expansion of the non-state pension insurance market. Analysis of the burden on Ukraine's State Budget by the Pension Fund involved assessing pension program funding from the State Budget and its contribution to the budget deficit. It reveals a consistent annual increase in State Budget allocations to compensate for the Pension Fund's income shortfall. Additionally, the study tracks changes in the replacement rate within Ukraine's pension system, the financial support rate for retirees, and the average pension amounts by age, along with the distribution of pensioners based on pension types and amounts to assess the adequacy of pension provision in Ukraine. Notably, the study disproves the notion that increased State Budget funding for the Pension Fund results from excessive financial provision for pensioners. The assessment of the financial support coefficient for retirees, derived from the ratio of employed population to pensioners, offers insights into the state's demofinancial burden. Utilizing this coefficient provides a more realistic understanding, considering both the employed population and those reaching retirement age who aren't classified as elderly. Furthermore, the article argues for the Pension System's reliance on additional funding, particularly from the State Budget's revenue section, and advocates for the continued development of the nonstate pension insurance system as the primary alternative to the current solidarity pension system in Ukraine.

Keywords

pension fund, national budget, number of pensioners, replacement rate.

JEL classification: G230; E620; DOI: https://doi.org/10.32680/2409-9260-2024-5-6-318-319-85-92

UD classification: 369.542:338.24.021.8 (477)

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