Amaglobeli, David and Wei Shi, 2016, “How to Assess Fiscal Implications of Demographic Shifts: A Granular Approach,” Fiscal Affairs Department How-To Notes (http://www.imf.org/external/pubs/ft/howtonotes/2016/howtonote1602.pdf).
Andrews, Emily S., 2015, “Pillar II Preconditions: Implications for Ukraine,” USAID Financial Sector Development Program in Ukraine.
Clements, Benedict, Frank Eich, and Sanjeev Gupta (eds.), 2014, “Equitable and Sustainable Pensions: Challenges and Experience (Washington: International Monetary Fund).
Clements Benedict, Kamil Dybczak, Vitor Gaspar, Sanjeev Gupta, and Mauricio Soto, 2015, “The Fiscal Consequence of Shrinking Populations,” IMF Staff Discussion Note SDN/15/21, October.
European Commission, 2015, “The 2015 Ageing Report—Underlying Assumptions and projection Methodologies” (http://ec.europa.eu/economy_finance/publications/).
Rudolph, Heinz and Roberto Rocha, 2009, “Enabling Conditions for Second Pillars of Pension Systems,” World Bank, Policy Research Working Paper.
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Prepared by David Amaglobeli (FAD).
Following the expected increase in the average wage due to the government’s decision to double the minimum wage from 2017, the replacement rate could drop closer to 30 percent.
Under the UN’s medium-fertility scenario, Ukraine is expected to experience a continuous net outflow of migrants.
Based on UN’s population projections under the medium-fertility scenario.
For OECD, labor force participation rate for the 50–59 age group is calculated as the simple average of rates for 50–54 and 55–59 age cohorts.
For more details on preconditions for the introduction of funded pillars of pension systems, see Rudolph and Rocha (2009).
On the other end of the spectrum is Poland, whose parliament in November 2016 approved the ruling party’s plan to roll back the previous retirement age increases introduced in 2012, from 67 years to 65 years for men and 60 years for women.
Preferential treatment of special pension recipients results from the fact that benefits are calculated under a different formula. Specifically, benefits under special pensions are assessed according to the last or best few years of new retirees’ careers, while under the general regime they are based on full-career average earnings.
According to the law, base salaries of judges are set in multiples of 30 to 50 of the minimum wage, depending on the level of the court. In addition, the total remuneration of judges includes various supplements. The amount of pension benefit is calculated as 50 percent of the total remuneration plus 2 percent for each year of service in excess of 20 years.
According to anecdotal evidence, the large number of pensioners could also be related to poor administration as, for example, weak flow of information regarding a pensioner’s death reaches the PFU with delays, causing pension payments to continue.
The regulatory base for lists 1 and 2 include the law on pensions (#1788), cabinet resolutions on approval of the lists of industries, occupations, positions and indicators giving right to retirement on preferential terms (#36) and on approval of procedure for workplace certification in terms of safety conditions (#442).
For women, the minimum retirement age of 50 years will be achieved by 2024.
The minimum years of service and the minimum retirement age will go up to 30 years and 55 years by 2024 and 2026, respectively.
Prior to the reform, there were 67 different social security contribution rates in the range of 36.76–49.70 percent depending on the degree of hazardousness of a job. The effective rate was about 40 percent, of which 3.5 percent paid by the employee and the rest by the employer. Following the reform, a single rate of 22 percent payable only by the employer replaced the multiple rates.
This regime creates an opportunity for arbitrage as it encourages hiring workers as sole proprietors.
In small part, this is also explained by legal exemption from mandatory contribution payments of certain groups.
For example, for someone with sufficient years of service to qualify for minimum pension, the marginal benefit of reporting salaries above one minimum wage but less than two minimum wages is nearly zero because of the existing policy that requires the government to top up the earned pension to the minimum subsistence level.
Children of war are defined as individuals who by the time the World War II ended (September 2, 1945), were 18 years of age or younger.
For more detailed information about the methodology, see Amaglobeli and Shi (2016).
The replacement rate used for calculations is 39 percent, which is calculated as the ratio of average pension to average economy-wide wage in 2015.
This assumption also implies that there is no effect from the decline in the number of pensioners resulting from the gradual increase in the number of individuals without sufficient number of contribution histories.