Non-state pension prevision development in Ukraine
Economy and Forecasting, 2017, issue 3, 31-50
The article examines the evolution of approaches for the construction of a multi-level pension provision model proposed by the leading international financial institutions and organizations. This model must meet the criteria of sufficiency, cost-effectiveness, sustainability, and reliability. It underlies of the concept of pension reform in Ukraine, which involves the implementation of measures of parametric and systemic character. Non-state pension provision, as an integral component of the pension system, is intended for the voluntary accumulation of savings for the additional pensions. The basic legislation on non-state pension provision came into force in Ukraine in 2004, but the amount of funds attracted by non-state pension funds remains insignificant at this time. Till 2008, an extensive growth of the non-state pension provision market was taking place: against the backdrop of a low base, the value of non-state pension funds assets actually doubled, the number of non-state pension funds, their contributors and participants increased dynamically. After the crisis of 2008-2009, annual growth rates of assets of non-state pension funds stabilized at the level of 25-30%, reaching, at the end of 2014, UAH 2 469.2 million, while the number of contributors and participants remained almost unchanged, and the number of non-state pension funds began to decrease, which is explained by the beginning of consolidation in this market. As a result of the crisis of 2014-2015, a decapitalization of non-state pension funds took place and their total assets at the beginning of 2016 decreased to UAH 1,980.0 million. The two main forms of decapitalization were net outflow of capital (exceeding the amount of pension payments above the amount of pension contributions) and loss-making activities (depreciation of securities, loss of deposits in banks and assets in the Crimea and in the east of the country). In 2016, despite the fact that the net outflow of capital continued, the process of growth of the non-state pension funds assets resumed. The two main categories of non-state pension fund contributors are individuals (households) and corporations (employers). Till 2015, in the total contributions, the share of the former was from 3 to 6%, and that of the latter from 94 to 97% (the phenomenon of growth of the share of individuals in 2016 in the total contributions to 16.4% requires additional study, but there is a high probability that such an increase occurred under the influence of employers, who prompted employees to co-finance corporate pension schemes). According to sociological surveys, only 10% of households in Ukraine saved part of their income, while giving preference to short-term investments, and about 40% of households indicated that they were forced to direct all income received to current needs. Statistics from other countries confirm the thesis of a direct relationship between household income and their inclination to save on an additional pension. Corporations (employers) are considering the introduction of supplementary pension schemes as a manifestation of corporate social responsibility and as an effective HR tool. As a rule, corporations of those sectors of the economy, where there is a higher level of competition in the labour market (labour demand), resort to such programs, and there is a need to expand the tools for stimulating personnel through a social package: the financial sector, telecommunications, the pharmaceutical industry, etc. Cross-country comparisons make it possible to conclude that other motivational factors and incentives, such as the use of retirement assets as sources of investment resources and the creation of a favourable tax regime, have a limited impact on employer participation in supplementary pension provision programs. Consequently, prospects for the development of non-state pension provision are primarily associated with an increase in incomes and increased competition in the labour market (labour demand). Participation of households in non-state pension provision is possible only in the long run, after meeting the priority investment objectives, such as "for the rainy day" savings, the purchase of expensive durable goods, etc. Increasing competition in the labour market would encourage employers to have a range of HR tools, including a social package with additional pension provision.
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