Ukraine social policy ministry opposes pension eligibility age hike

Social Policy Minister Pavlo Rozenko said in an interview with the Ekonomichna Pravda news site published on Dec. 15 that he opposes hiking the pension age by five years to reduce such expenditures. “Everyone understands that balancing the Pension Fund deficit means, above all, legalizing UAH 200 mln in wages that are paid under the table every year, which means that the Pension Fund fails to receive UAH 70 mln every year,” he said. Rozenko couldn’t confirm whether some of the Pension Fund’s staff of 36,000 employees would be cut. The government will propose launching experimental pension investment funds, with contributions drawn from the salaries of those under 25.

The Finance Ministry plans to raise the pension eligibility age to 65 for men and women from 60 years old currently, which it estimates will cut UAH 4.3 bln in spending, the dt.ua news site reported on Dec. 11, citing a document listing the ministry’s recommendations that it obtained. Up to 90 percent of pensions will be withheld from those still working, the recommendation said.

Zenon Zawada: It’s hard to imagine austerity measures more unpopular than reduced pension payments or hiking the eligibility age, especially considering that average male life expectancy is 62 years. So it’s natural that Rozenko has voiced his opposition to the measure, to be followed by the potential political maneuver of shifting the blame – should they be approved – to the foreign-born finance minister, who isn’t a politician and won’t have to worry about damage to her poll ratings, or those of her party (she is independent).

Our position is that this government will sound its own death knell politically if it approves harsh cuts in social payments (particularly pensions) without eliminating corruption in state bodies, offshore tax evasion schemes and even legal loopholes. The oligarchs and bureaucrats will need to bear the burden or the public will revolt. Yet even excluding the political factor, we see a series of more effective ways to reduce spending and improved revenue rather than meddling with the pension eligibility age.