The Law of Ukraine
On Non-State Pension Provision
Date of Entry into Force:
January 1, 2004
The Law of Ukraine “On Non-State Pension Provision” shall define legal, economic and organizational grounds for the non-state pension provision in Ukraine and shall regulate legal relations connected with this type of activity.
The system of non-state pension provision is a component part of the accumulation pension system that is based upon a voluntary participation of legal entities and natural persons in forming pension savings in order to ensure for participants in non-state pension provision system payment of additional pensions to pensions of the general obligatory state pension insurance.
According to the Law, subjects of non-state pension provision system include non-government pension funds, contributors and participants in non-government pension funds, natural persons and legal entities who/which have concluded lifetime pension insurance contracts, disability or death insurance contacts and others.
Non-state pension provision shall be exercised by:
- pension funds;
- insurance companies;
- banking institutions.
Scheduled auditing inspections of activities of organizations providing services on non-state pension provision shall be carried out at least once a year and paid for by legal entities that are being inspected. Results of auditing inspections shall be subject to publication. The State Commission for Regulation of Financial Services Markets of Ukraine shall set requirements for auditors who carry out audits of legal entities – subjects of non-state pension provision.
Non-government pension funds shall be established on the basis of a decision adopted by founders and shall not aim at receiving profits for further distribution among their founders. Non-state pension provision is an exclusive type of activity for pension funds. A pension fund shall act on the basis of a statute. The statute of a pension fund shall be adopted by its founders. Amendments to the statute of a pension fund shall be introduced by the Board of such pension fund, which should be agreed with its founders.
The state registration of a pension fund and the issuance of a relevant certification shall be performed by the State Commission for Regulation of Financial Services Markets of Ukraine.
Pension funds can be established as open pension funds, corporate pension funds and professional pension funds. Pension funds shall be prohibited from changing their type and name indicated in their statutes after they have been registered by the State Commission for Regulation of Financial Services Markets of Ukraine. A single management body of a pension fund shall be the Board of a pension fund.
A participant in a pension funds shall be a natural person in whose favor pension fees are being paid to a non-government pension fund and who will have the right or will gain the right to receive pension payments from such fund. Participants in a pension fund can be Ukrainian citizens, foreigners and stateless individuals. Participation of natural persons in any non-government pension fund shall be a personal choice for everybody. Pension payments can be paid to a participant in a pension fund or their heirs.
A pension contract shall be an agreement between a pension fund and its contributor, which is concluded by administrator of such pension fund on behalf of such fund and according to which such pension fund provides non-state pension provision for a participant or several participants in such a fund at the expense of pension fees of such a contributor. A pension contract shall come into effect from the moment when it is signed by the contributor in such a fund and the administrator. The Law stipulates cases for pre-term termination of a pension contract.
An entity that is paying pension fees in favor of a participant in a fund by way of transferring money to a non-government pension fund according to conditions of a pension contract shall be a contributor of such a fund. A contributor can be a participant, spouses, children, parents, and the employer of a participants or a professional association where such participant has a membership.
Pension funds can perform the following types of pension payments:
1) pension for a defined period;
2) lump sum pension payment.
The amount of pension payments shall be determined proceeding from the amounts of pension funds that are accounted on the individual pension account of a participant in such a fund, the period of payments and a formula for calculating the size of pension for a definite term. Pension payments shall be performed in the national currency of Ukraine.
Pension funds shall be inherited by an individual (individuals) who are heirs of the owner of such funds according to the civil legislation of Ukraine.
A pension fund can be founded:
- an open pension fund – by one or several legal entities;
- a professional pension fund – by an association of legal entities who are employers, an association of natural persons, including trade unions (or an association of trade unions), or natural persons related by type of their professional activity (profession);
- a corporate pension fund – by a legal entity who is employer or several legal entities who are employers; these can be joined by employers who are payers of pension fees.
Only employers which have been operating without loss for at least one fiscal year except cases when an employer was reorganized may be founders or employers-payers of a corporate pension fund.
A legal entity can be simultaneously the founder of only one corporate or one professional pension fund.
After receiving a notification on the liquidation of a pension fund, each participant in such a fund shall submit a written application to the liquidation commission indicating another pension fund, insurance organization or a pension deposit account where their pension funds should be transferred to.
The following entities may act as the administrator of a non-government pension fund:
legal entity providing professional services in administering non-government pension funds (professional administrator);
single founder of a corporate pension fund which has made a decision on self-administration of this fund;
asset management company.
Assets of non-government pension funds can be managed by the following entities: an asset management company, a bank with respect to assets of a corporate pension fund set up thereby, as well as a professional administrator that received a license for performing asset management. Asset management in a pension fund shall be performed on the basis of a license for professional activity on the securities market – asset management. Such a license shall be issued by the State Commission for Securities and Stock Market of Ukraine.
In order to be the custodian of a pension fund, a bank must meet the following requirements:
- to have a license of the State Commission for Securities and Stock Market of Ukraine for performing professional activity on the securities market i.e. depository activity as a security custodian;
- not to be a person affiliated with the pension fund, whose Board has concluded a contract on servicing such a pension fund by a custodian, the administrator, entities managing assets, founders or the auditor of such a fund and affiliated persons of the above entities;
- not to be an asset manager of the corporate pension fund set up by this bank;
- not to be a creditor of the administrator or asset manager of the pension fund with whom the contract for the custody of pension assets has been concluded.
The Law also covers issues on how to submit reporting and to publish information on non-government pension security.