The Law of Ukraine

On Mandatory State Pension Insurance

Date of Entry into Force:
January 1, 2004

The Law defines principles, grounds and mechanisms for operation of the system of mandatory state pension insurance, granting, re-computation and payment of pensions, and for provision of social services subsidized by the Pension Fund.

Also the Law regulates the procedure for forming the Accumulation Pension Fund and for using its funds to finance expenditures on purchase of life annuities for or lump-sum payments to the insured individuals, their family members and other persons provided for by this Law.

The Law defines the following terms: “actuarial calculations”, “life annuity from the Accumulation Pension Fund”, “insured individual”, “custodian”, “accrual rate”, “asset management company”, “minimum pension”, “minimum insurance fee”, “accumulation pension account”, “non-state pension fund”, “pension benefits”, “pensioner”, “employer”, “social services”, etc.

The Law defines the structure of the Ukrainian pension system which shall comprise three pillars:

the first pillar - the solidarity system of the mandatory state pension insurance (hereinafter referred to as the solidarity system), which is based on the principles of solidarity and subsidization. Pensions and social services shall be provided at the expense of the Pension Fund;

the second pillar - the accumulation system of the mandatory state pension insurance (hereinafter referred to as the accumulation pension insurance system), which is based on the principle of accumulation of insured individuals' money in the Accumulation Fund;

the third pillar - the non-state pension system, which is based on the principle of voluntary participation of individuals, employers and their associations in the accumulation of pension savings with the purpose of pension provision to the individuals subject to conditions and procedures established by legislation on non-state pensions.

The first and the second pillars constitute the mandatory state pension insurance system in Ukraine.

Ukrainian citizens may participate in and receive pensions from different pillars of the pension insurance system in Ukraine.

In addition to pensions benefits from the pension insurance system, disabled persons shall have the right to receive supplements, allowances and raises to the said benefits, and an additional pension according to the procedure and at the expense of funds envisaged by the Law.

The right to receive pension and social services from the solidarity system shall be given to:

Ukrainian citizens who are insured according to the present Law and have reached the retirement age established by the present Law, or have been recognized disabled and have the necessary covered service period for respective type of pension;

Individuals to whom a pension was granted according to the Law of Ukraine “On Pension Provision” before the present Law came into force.

The right to receive life annuity and lump sum at the expense of the Accumulation Fund shall be given to the insured individuals and their family members and/or their heirs under conditions and according to the procedure stipulated by the present Law.

Individuals who voluntarily paid insurance fees to the solidarity system and/or to the accumulation pension insurance system, according to the procedure and in amounts determined by the present Law, shall have the right to receive pension and social services at the expense of the Pension Fund and/or to receive life annuity and lump sum at the expense of the Accumulation Fund.

Foreigners and stateless persons staying in Ukraine for legal reasons shall have the right to receive pension benefits and social services from the system of the mandatory state pension insurance on equal footing with Ukrainian citizens.

The Law sets out types of pension benefits and social services to be provided at the expense of the Pension Fund in the solidarity system, as well as categories of individuals subject to the mandatory state pension insurance.

Also the Law determines the procedure for calculating, computing and paying insurance fees for the mandatory state pension insurance.

The Law identifies the procedure for determining insurance record to allocate pensions in the system for the mandatory state pension insurance, to pay out old age pension, disability pensions, as well as survivor's pension.

Apart from that, the Law sets forth the procedure for determination wage (income) taken into account in pensions calculation, for appointing re-computation of pensions and paying out pensions.

The Law standardizes the procedure for paying out pensions at the expense of the Accumulation Fund. In particular, the Law identified types of pensions paid at the expense of the Accumulation Fund, the procedure for concluding and paying for the insurance agreement for life annuities, conditions and procedure for obtaining lump sum, and types of life pensions.

The Law establishes the management procedure in the solidarity system. The Pension Fund shall manage funds in the solidarity system. The Budget of the Pension Fund, which is a plan for creating and using the purpose insurance fund formed at the expense of insurance fees to the solidarity system, is approved within the Pension Fund.

The Law set outs the procedure for establishing and running the Accumulation Fund, as well as the procedure for keeping pension assets of such a fund.

State regulation and supervision in the system of the mandatory state pension insurance shall be the responsibility of:
- the central body of executive power in the field of labor and social policy, and its territorial bodies;
- the central body of executive power in the field of finance and its territorial bodies, and the Accounting Chamber of Ukraine;
- the State Commission for the Regulation of Financial Services Markets of Ukraine;
- the State Commission for Securities and Stock Market;
- the National Bank of Ukraine.

The Law identifies responsibility in the area of the mandatory state pension insurance. The Law envisages responsibility of insurers, banks, organizations paying out and delivering pensions, and their officials, as well as the Pension Fund, its bodies and officials.
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