Ukraine Develops Non-State Pension Funds
Seeking to become a member of the world community, Ukraine has been adopting successful practices of developed economies first evidenced by the passage of the “On Non-State Pension Provision” law in 2004. With its passage, the country created a legal framework for the operations of Non-State Pension Funds (NPFs), granting Ukraine’s citizens the opportunity to influence the amount of pension benefits paid to them upon retirement.
The main goal of a NPF is to accumulate and increase the voluntary pension contributions of its participants. Every Ukrainian citizen has the right to select the most efficiently operating private fund. Having opened an account with a fund, one has the right to define the rate and schedule of contributions he pays into the account. This allows the participant to decide the amount of the additional pension that will be paid upon reaching retirement age.
USAID provides active assistance for the formation of Non-State Pension Funds in Ukraine. In the developing stage of the regulatory and legal framework for the non-state pension provision, USAID assisted Ukrainian specialists by conducting working group meetings and workshops. International experts consulted with specialists from the Ministry of Labor and Social Policy of Ukraine, the Securities and Stock Market State Commission, the Pension Fund of Ukraine and State Commission for Regulation of Financial Services Markets of Ukraine on the best international practices for private pension provision and the implementation of such practices in Ukraine.
With USAID support, the State regulators implemented training programs for specialists and dynamic public awareness campaigns on the effective development of NPFs’ policies and operational principles. In addition, USAID is collaborating successfully with NGOs and financial specialists who will be instrumental in the future development of NPFs.
As with any other new development effort, the NPF faces challenges. According to a recent sociological survey funded by USAID in Ukraine, practically all respondents welcomed the new opportunity to receive additional pension; however, people were not sure whether the new entities could be trusted with their money. An educational program will be needed to gain Ukrainian citizens’ trust, to educate them on the basic concepts of NPF activity, where assets will be invested, how investment can increase the amount of their pension and, most importantly, how to make use of these new opportunities.
Yet, the NPF development trend is quite optimistic. According to the latest data, more than 50 NPFs have been established within the 30 months since the Law’s passage n 2004, with NPFs having accumulated approximately UAH 100 million to date. Between March 2005 and March 2006 alone, NPF assets increasing by 500%. USAID’s Capital Market Project continues to effectively support NPF development in Ukraine by providing experts-and-consultancy and technical assistance to the State regulators and NGOs with regard to education of the population, and the development and implementation of training programs for specialists.
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