Digitalization in Ukraine works wonders, because you can do anything with the help of "Diya". In particular, you can also get a pension there to arrange. However, this will not increase its volume and, unfortunately, will not affect the quality of life. We will get what the state can issue at that time. Given the current situation, hopes for a cloudless old age are still illusory. Therefore, those who still have time, take everything into their own hands.
Why it is worth starting to save "for the future" as early as possible, what challenges the pension system has caused the crisis, and what Ukrainians can do to meet old age with dignity, she told Mind Financial advisor, COO at Smart Family Office Alina Shukh.
For most Ukrainians, the issue of pensions remains something they prefer to think about “someday, but not now.” However, this is a wrong approach. It is not worth hoping that the state will be able to provide for your future.
It may seem strange to read that a person in their 20s or 30s should be thinking about retirement. Especially in a war environment, when emotional resources are focused on how to survive “today.” With anxiety, daily damage to infrastructure, and resulting power outages, it can sometimes be difficult to plan even for the next day.
However, despite all the circumstances, it is worth taking care of your financial stability in advance.
In Ukraine, it will soon be impossible to receive a decent pension, or at least any pension at all. The main reason is the demographic crisis, which, in the context of war and reconstruction, will likely only worsen.
The pension system of Ukraine consists of three levels
SolidaryThis is when people who work today support today's pensioners: the deducted money goes into one "pot" and is paid out immediately.
Mandatory accumulative. Mandatory deductions from an employee's salary directly to his future pension. This money must be invested and paid to the same employee after 20 years. Unlike the solidarity system, such savings can be inherited.
Non-governmental pension softwareThe third level is similar to the second, only you decide whether to save for your retirement and which fund to use.
Why does the solidarity system collapse? The equation does not converge
Currently, there are approximately 7.5 million employees working in the white-collar sector and 2.8 million single tax payers who also pay a single social contribution (SSC). This totals about 10.3 million people. According to the State Pension Fund of Ukraine (SPF), there are 10.2 million pensioners.
That is, one employee today pays for one pensioner. To pay pensioners, the employer pays 22% SSC from the salaries of officially employed employees.
According to the Pension Fund of Ukraine, on average, one employee can now pay approximately UAH 3,500 per pensioner. The remaining deficit (and let me remind you that the average pension is UAH 5,385) is covered by the state budget.
Since 2004, the Pension Fund has been financed in this way - that is, from money that should have gone to education or medicine.
In 2023, the Pension Fund budget received UAH 777.3 billion from all sources of funding. Own revenues amounted to UAH 489.0 billion.
Although the PFU presented a draft budget for 2024 that does not provide for additional funding from the state treasury, it is not worth hoping that the situation will improve globally in the future.
After all, the number of those working is already insufficient to cover the needs of pensioners. And over the years, the situation will only worsen due to the demographic crisis.
That is, when today's youth retire, it will be practically impossible to cover all payments, even with additional funding from the state budget.
The problem could be solved by switching to a mandatory savings system. When each person saves for their retirement, and the fund that manages the assets will be able to invest these funds so that they do not depreciate. The question remains open that our pension funds are very limited in the choice of investment instruments, plus there are certain legislative obstacles.
But even if the reform is implemented right now, the current generation will have to both support today's pensioners and save for their own retirement. Which, obviously, can be financially difficult. Tectonic shifts will not happen in a year. According to various estimates, it will take about 30 years for the first generation to feel the effect.
Ukrainians should take planning their future into their own hands
Where to start? With financial literacy as such, the principles of saving and accumulation.
It is important to master investment tools that will help protect your money from depreciation in the future. After all, saving for retirement is a long-term process.
Therefore, physically putting money away and taking it out of a drawer in 30 years is a wrong strategy. After all, inflation will eat up most of the reserve.
Given the length of this savings journey, I advise you to be especially careful in choosing currencies and instruments for investment, to focus on more stable ones. And be sure to distribute the investment amount between different instruments.
We create an investment portfolio taking into account opportunities and goals for both the near future and the future.
Investment instruments
Military bonds
The National Bank holds bonds with sufficient yield to cover inflation. However, this is an opportunity not only to secure your funds, but also to help the state finance our army and victory. It is also convenient, because the product is available in Action. The entry threshold and requirements for opening accounts and submitting documents are reduced.
Deposits
A riskier option than the previous one, with a lower return. Deposits work through an intermediary – a bank. If the bank goes bankrupt, the money will be returned, but this is not always an easy and far from quick process.
Real estate
Before the full-scale invasion, this option was one of the main investment tools for Ukrainians. Now, due to the threat of shelling, investments in square meters have logically lost popularity.
Agricultural Earth
An interesting asset from an investment point of view for a Ukrainian investor: the capitalization of investments is growing and there is passive income - rental payments, it is also an investment in one's own country. However, a full-scale invasion greatly hinders the development of the market.
Cryptocurrencies
Still not defined by law, there is no law on paying taxes. It is also a rather risky instrument, it is easy for a beginner in this field to lose money in the pursuit of profits. I do not advise investing more than 20% of capital in this instrument.
Foreign stock market
You can build a full-fledged portfolio from all possible asset classes: from shares in a business to loans, real estate or metals. There is no entry threshold, for example, there are instruments starting from a few cents. However, this path requires in-depth knowledge. Building an investment portfolio is worth following a balanced strategy.
Venture investments. Startups
The capital with which you should start thinking about venture investments is from $250 thousand. Suitable for people who take the risk of losing money and at the same time hope for big profits. Just like with cryptocurrencies, you should not invest more than 20% of your capital here.
Rules for saving for retirement
The main thing is not to forget that your retirement savings strategy should be one of, not the only component of your overall financial strategy. That is, you should have another reserve for unforeseen expenses.
Retirement money is inviolable; you can't use it to buy a car or cover unplanned expenses.
Will there be pensions in Ukraine in 20–30 years? You shouldn't hope, but you should act. In order not to depend on state payments and decisions of employees and to minimize the consequences of constantly recurring crises in the future. The main key to a comfortable old age is to start the path of savings as soon as possible.