Factors of low population involvement in the non-state pension system in Ukraine through the prism of European practice

Abstract

This article examines the specific features of the regulatory framework and the practical aspects of the private pension savings market in Ukraine against the backdrop of intensifying contemporary macroeconomic and demographic challenges. Based on monitoring of current trends, it is noted that the first tier of the national pension system is rapidly losing its financial stability due to the devastating impact of full-scale military aggression by the Russian Federation, the catastrophic outflow of labour resources abroad and the progressive ageing of the population which generates long-term threats of budget deficits. It is argued that under such circumstances the modernisation of the third tier – the institution of non-state pension insurance – becomes an objective necessity; despite its high potential, mentioned institution has not taken on the characteristics of a mass social instrument in Ukraine yet.

The methodological basis of the study is based on a combination of methods of systemic structuring, comparative legal analysis and formal legal analysis. The tools employed have made it possible to objectively assess the current infrastructure of non-state pension provision in Ukraine, to audit the existing body of legislation and to theoretically identify and classify the key destructive factors hindering the dynamic development of this legal institution.

The organisational principles of individual capital formation in Ukraine are examined through the prism of the development of a legal culture of savings. A thorough comparative study of domestic practice and leading European experience has been conducted, using the highly effective Dutch pension model as an example. The comparative analysis reveals the key legal and financial levers for encouraging citizens to participate in non-state pension insurance, in particular through a flexible system of tax deductions and incentives. Based on the data obtained, it has been established that the low participation of Ukrainians in savings schemes is due to a prolonged crisis of public trust in financial institutions, low levels of real income and financial literacy among the population, as well as the absence of effective state incentives and long-term co-financing plans.

Based on a synthesis of the research findings, strategic directions for improving the non-state pension system in Ukraine in the context of European integration have been outlined. These include: harmonising Ukrainian legislation with EU law, in particular the implementation of the provisions of Directives 2016/2341 and 2014/50/EU; a radical modernisation of the organisational structure of non-state pension funds by strengthening management accountability and introducing mandatory independent audits; the introduction of innovative asset management tools to enhance returns and diversify risks and the development of a transparent ranking system for pension funds. Particular attention has been paid to the technological modernisation of the existing «Pension Calculator» service of the Pension Fund of Ukraine by integrating interactive modelling systems for non-state savings into it with the aim of overcoming mental barriers and raising citizens’ financial literacy.