According to the new regulations, pensions will be recalculated annually, taking into account changes in wages. If the minimum wage increases, the basic part of the pension will also automatically rise.
Similarly, an increase in the average wage will lead to an automatic adjustment of the value of points and the insurance component of the pension. However, unlike the current system, inflation rates will no longer be considered in the indexing process. This means that if the average salary remains unchanged, pensions will not increase.
In some European countries where similar models are in place, pensions can even decrease if the average salary declines. While this is a possibility, the steady growth of the average salary in Ukraine suggests that pensions will continue to rise within the new system.
For working retirees, the reform introduces another significant update. Starting from March 1 of each year, pensions will be recalculated automatically, taking into account additional points earned during the previous year.
This marks a departure from the current practice, where recalculations occur every two years and often rely solely on years of service rather than on wages.
By implementing this points system, the reform aims to create a more transparent and dynamic process for adjusting pensions, aligning with practices in other countries. Although there are some risks associated with economic fluctuations, the reform is expected to benefit most retirees by ensuring that their payments reflect changes in wages.