Financial Pressure on Ukraine’s Pension Fund: Debts and Shadow Employment
The increasing debts of taxpayers and widespread shadow employment are increasingly complicating the financial stability of Ukraine’s Pension Fund.
Although the overall income of the fund shows faster growth than projected, the reality is more complex and challenging.
According to the article ‘Pension Report: New and Old Problems of Pensioners’ by Viktor Konev, the debt for paying the Single Social Contribution (SSC) exceeds 20.6 billion hryvnias, and in the first half of 2023 alone, this debt grew by an additional 500 million hryvnias.
A significant portion of these debts belongs to enterprises on the brink of bankruptcy and individuals without assets to settle their debts.
Additionally, there is a problem with contributions from employees who are officially employed but do not fully pay their SSC.
To combat this, the Pension Fund transferred data to the State Labor Service on 1.4 million workers suspected of violations, and to the tax authorities on 236,000 payers with suspicious insurance records.
As a result, nearly 34,000 workers from the shadow economy were registered officially, increasing the Fund’s budget by 56.6 million hryvnias in SSC revenue.
The Pension Fund also hopes for collaboration with regional authorities, as about 124,000 companies in various regions pay salaries below the minimum, indicating potential shadow economy activity.
Despite the apparent interest of local authorities in legalizing income, their willingness to support the Fund remains doubtful.
Next year, according to the draft budget, the minimum pension will rise from 2361 to 2595 hryvnias, while the maximum will increase from 23610 to 25950 hryvnias.
However, analysts warn that the planned 8% indexation does not fully account for inflation, which could lead to a decrease in the real purchasing power of pensions.