Pension Recalculation After Transfer from a Long-Service Pension to an Old-Age Pension

Pension provision for Ukrainian citizens is governed by a number of legislative acts that determine how pension benefits are calculated depending on insurance record, type of employment and other factors. In practice, however, the Pension Fund of Ukraine may make errors when transferring a person from one type of pension to another, including by applying incorrect legal provisions or calculation indicators, which can result in lower pension payments.

This was the situation faced by Ms. Yunak, who had been receiving a long-service pension as an education worker since 2010 under the Law of Ukraine “On Pension Provision.” In 2020, following her application, Ms. Yunak was granted an old-age pension under the Law of Ukraine “On Compulsory State Pension Insurance.”

Ms. Yunak contacted the Pension Center for legal assistance in determining whether her pension had been calculated correctly.

After analyzing the materials of her pension file, our lawyers discovered that the Pension Fund had used the average salary indicator in Ukraine for 2014–2016 when calculating the amount of her old-age pension. However, our position was that the average salary indicator for the three calendar years preceding the year in which the old-age pension was granted should have been applied, namely the indicator for 2017–2019.

Given the failure of the Main Department of the Pension Fund of Ukraine in the Sumy Region to apply the average salary indicator for 2017–2019, we decided to challenge the pension calculation before an administrative court.

Our claims were based on the following legal arguments:

The Law of Ukraine “On Compulsory State Pension Insurance” provides for the following types of pension benefits: an old-age pension; a disability pension resulting from a general illness (including an injury unrelated to employment and disability from childhood); and a survivor’s pension. Importantly, this Law does not provide for a long-service pension as a separate type of pension.

At the same time, Ukrainian legislation regulates pension rights for persons who worked in positions that entitled them to a long-service pension and establishes the conditions under which such persons may subsequently acquire the right to an old-age pension under the compulsory state pension insurance system.

The Law of Ukraine “On Compulsory State Pension Insurance” also establishes rules governing transfers from one type of pension granted under that Law to another type of pension provided for by the same Law.

However, Ms. Yunak’s long-service pension had originally been granted under the Law of Ukraine “On Pension Provision,” while her old-age pension was subsequently granted under the Law of Ukraine “On Compulsory State Pension Insurance.”

Therefore, in Ms. Yunak’s case, this was not merely a transfer between two types of pension granted under the same law. Instead, a new type of pension was granted under a different law. Accordingly, our position was that the average salary in Ukraine for the three calendar years preceding the year in which the new old-age pension was granted had to be used for its calculation.

After considering the case, the court of first instance fully supported our legal position. The court confirmed that the Pension Fund’s actions did not comply with the applicable legal requirements and that, when granting the new old-age pension under the Law of Ukraine “On Compulsory State Pension Insurance,” the average salary indicator for the three calendar years preceding the year in which that pension was granted had to be applied. In this case, the relevant period was 2017–2019.

The court declared the decision of the Main Department of the Pension Fund of Ukraine in the Sumy Region unlawful and set it aside. The pension authority was ordered to recalculate and pay Ms. Yunak’s old-age pension using the average salary indicator for 2017–2019, taking into account the amounts already paid.

The Pension Fund subsequently complied with the court judgment in full, and Ms. Yunak’s pension was recalculated in accordance with the legal principles established by the court.