New pension rules: Ukrainians are being offered three types of benefits

New pension rules being prepared by the government are effectively changing the philosophy of old‑age security: instead of a single pension, Ukrainians are being offered three separate types of benefits – solidarity, professional, and funded. The idea of the reform is that the pension should depend to a greater extent on a person’s actual contributions and working conditions, and not only on formal length of service, and that the gap in payments between people with similar careers should be reduced.

The current system is considered unfair: some pensioners receive very low pensions, while others get disproportionately high payments, even though their employment histories may be similar. The Minister of Social Policy, Denys Uliutin, openly states that the main principle of the new model is that “a pension should depend on what you actually earned and paid”, rather than on status or access to special rules. This is why the focus is shifting from benefits and special pensions to transparent contributions into systems that are easier for citizens themselves to verify and understand.

The basis of the updated model will remain the solidarity pension – a classic payment from the Pension Fund, financed by contributions from working people and redistributed among current retirees. The government plans to update the approach to calculating such a pension in order to link it to actual contributions: those who have worked stably and “in the clear” and have paid the single social contribution (SSC) will receive a higher basic payment, and the minimum threshold is proposed to be set at no less than 6,000 hryvnias. At the same time, the solidarity component should serve as a guaranteed “foundation” for those who were unable to accumulate sufficient funds or worked in less protected segments of the labour market.

The second element is the professional (special) pension, which will gradually replace the current special pensions for certain categories of workers. This concerns people with preferential working conditions or the right to early retirement – for example, due to harmful conditions, high risks, or the special nature of their service. Under the new logic, these increased or early payments should no longer be financed from the solidarity system, but rather paid from separate professional funds at the expense of additional contributions by employers and the workers themselves in the relevant sectors.

In practical terms, this means that a person with preferential service will still be able to retire earlier, but until reaching the general pension age the payments will come precisely from the professional component and not from the common “solidarity pool”. This approach should reduce the burden on the Pension Fund, which now finances both basic and increased pensions, and make the system more understandable for those who do not have any special status. The transition to professional pensions, according to government estimates, will be gradual and may stretch over at least a decade so as not to violate the acquired rights of current pensioners and future beneficiaries.

The third component is the voluntary funded pension, which is intended to become an instrument of personal financial responsibility for one’s standard of living in old age. Unlike previous ideas of mandatory funded contributions from wages, the government is now betting on voluntary participation with an automatic enrolment mechanism, where a person is included in the system by default but can opt out. Contributions to such funds are proposed to be launched from 2027 as an addition to the SSC, and the funds will be invested in the financial market with a long‑term horizon.

The minister emphasises that mandatory funded models have shown weak results in a number of countries, particularly in Poland and Hungary, where they were partially rolled back. Therefore, Ukraine wants to combine an incentive‑based approach (tax benefits, automatic participation) with freedom of choice: opting out of savings, according to officials, will not be prohibited, but will lead to a significantly lower overall level of pension benefits. In this way, the three‑tier scheme should ensure that basic needs are covered by the solidarity pension, while a higher standard of living is provided by the professional and funded elements.

A separate focus of the reform is on fairness and transparency: today two people with the same length of service and salary often receive different pensions because of various “special regimes” and historical distortions. The introduction of uniform rules for the solidarity component, the removal of special pensions from the general system, and a clear linkage of payments to contributions actually paid should reduce the scope for subjective decisions and political influence over particular groups. For businesses and employees this means greater predictability: it is clear how much and where is being paid, what rights are being accumulated, and how they are converted into benefits after retirement.

At the same time, the new rules also carry risks. Those who work unofficially or receive “grey” wages will find it harder to count on a decent solidarity pension, since the amount of benefits will depend even more strictly on legal contributions. For the state, the key challenge will be building trust in funded instruments: without transparent regulation, reliable administrators, and protection of savers’ rights, a voluntary system will not be able to become truly widespread. In addition, the transition period, when some citizens will already be paying contributions into new funds while the solidarity system will still require substantial financing, will demand careful budget policy.

From a practical point of view, every Ukrainian should already now assess their “pension trajectory”: whether they have sufficient official service and contributions for a basic pension, whether they fall under the professional system, and whether they are ready to make voluntary savings to increase their income in old age. Businesses, for their part, need to prepare for new requirements regarding professional pensions and possible additional contributions, to revise HR policies and incentive systems, taking into account the long‑term costs of employee pension provision. Sound planning and consultations with specialists will be an important part of adapting to the three‑tier model. If you have any questions or issues related to pension reform, choosing the optimal pension savings strategy, or analysing your future benefits, please contact our specialists for individual advice.

Author – Svitlana Krutorohova, attorney at the law firm “Legal Company ‘WINNER’”.