Pension Reform in Ukraine: What Is Changing in the Pension System
The main objective of pension system reform is to restore fairness, transparency and accountability in the distribution of pension funds. This is necessary to ensure adequate financial support for older people.
Today, Ukraine’s pension system remains overly complex, is governed by numerous laws and includes many privileges, including so-called special pensions. This situation leads some citizens to lose motivation to pay social contributions, while others seek more favorable pension conditions through the courts. As a result, ordinary pensions remain low, while the system as a whole is perceived as unfair.
The Ministry of Social Policy of Ukraine is actively developing a new comprehensive model of the pension system, which is intended to gradually make it more transparent and fair and to provide pensioners with an adequate level of income.
A draft reform of the solidarity pension system and the introduction of a funded pension system is currently being prepared for consideration by the Government and Parliament. Work is also underway to develop occupational pension schemes similar to those operating in many developed countries. At the same time, the first steps toward improving the existing pension system have already been taken.
One of the first steps was to establish unified rules for calculating preferential service for military personnel and employees of authorities with special status. Previously, each agency had its own criteria for calculating preferential service, determining how each month of service affected a person’s future pension. These rules, which were based on regulations dating back to 1992, could differ even for people performing similar duties in different institutions, which led to significant disparities. In some cases, the rules were particularly controversial because military personnel currently serving on the front line could have less favorable conditions than those who had not directly participated in hostilities. This issue was addressed by a government resolution introducing new rules for preferential service for employees directly involved in the defense of Ukraine. The new rules apply from the date the resolution entered into force, while preferential service accumulated under the previous rules is preserved.
Disparities in pension payments for pensioners from different regions, including temporarily occupied territories (TOT), have also largely been eliminated. Previously, different procedures applied to Ukrainians from the so-called “old” and “new” temporarily occupied territories. For example, residents of the “old” temporarily occupied territories could receive their pensions only if they had a certificate confirming internally displaced person status, even if they had moved to government-controlled territory long ago and established their permanent lives there. In addition, they could receive pension payments only through Oschadbank, while other pensioners were entitled to choose any authorized bank. Different requirements also applied to identification procedures and transactions on pension accounts. Under the new approach, Ukrainians residing in government-controlled territory are to receive pensions under the same rules.
Verification has also been carried out in relation to people receiving additional payments for residing in areas affected by radioactive contamination. In recent years, there had been a significant increase in the number of people registering or moving to such areas, which are located in five regions and include almost one thousand settlements, in order to obtain the corresponding payments. In many cases, individuals established their entitlement to these additional payments through court proceedings. At the beginning of 2022, approximately 10,000 people were receiving such payments, while by the end of 2024 their number had increased to 147,000. Monthly expenditure increased from UAH 50 million to UAH 1.2 billion. In January 2025, a verification process was initiated to ensure that payments were received only by those who had actually resided permanently in these areas since the Chornobyl disaster. Following verification of information with the State Migration Service, the Pension Fund continued payments to approximately two-thirds of recipients, while payments to the others were discontinued.
It is also important that, for the first time in 21 years, a procedure was approved regulating the use of funds transferred to the Pension Fund of Ukraine from the state budget. Previously, information about the specific payments financed through state budget transfers was difficult to access. This created opportunities for misleading interpretations, including claims concerning a significant deficit of the Pension Fund, although according to the information presented by the authorities, it operated without a deficit in 2023 and 2024. Funds allocated from the state budget are intended to finance special pensions, status-related allowances and various social guarantees that do not form part of the solidarity pension insurance system. In other words, funds derived from the Unified Social Contribution paid by citizens should not be used for these purposes. There is now a clearer regulatory framework governing the use of budget funds and determining the priority of payments.
In addition, the Ministry of Social Policy has introduced more detailed forms for the Pension Fund’s monthly and quarterly reporting. This approach is intended to make information clearer, more understandable and better structured for analysts, journalists, policymakers and the general public. The first report on the use of Pension Fund resources under the new reporting formats is being prepared, which should help Ukrainians better understand how the pension system operates and how its funds are used.
Ukraine’s pension system remains complex and diverse, and not every solution can be universal or produce immediate results for everyone. Nevertheless, problems that can be addressed through secondary legislation are gradually being resolved. At the same time, work continues on broader systemic changes to pension legislation.
