The funded pension insurance project: how much will employees and employers pay

The draft Law "On Compulsory Accumulative Pension Provision" has been published on the website of the FEU.

The document provides for mandatory participation in the funded pension system for all categories of employees.

The mandatory accumulative contribution for employees will be as follows:

1% of the salary during the first year from the date of commencement of payment of accumulation contributions;
2% - during the second year;
3% - during the third and subsequent years.

At the same time, the personal income tax rate will be reduced:

up to 17% - during the first year from the date of commencement of payment of accumulation contributions
to 16% - during the second year;
to 15% in the third and subsequent years.

In addition, an additional accumulative contribution for employees will be introduced:

1% of the salary during the first year from the date of commencement of payment of the accumulation contributions;
2% - during the second year;
3% - during the third and subsequent years.

At the same time, an employee may refuse to pay the additional accumulation contribution or resume its payment on the basis of an application submitted to the employer. The application for refusal to pay additional accumulation contributions will have to be submitted annually.

It is also proposed to introduce a mandatory accumulation contribution for employers, which will also be equal to:

1% of the accrual base during the first year from the date of commencement of payment of the accumulation contributions;
2% - during the second year;
3% - during the third and subsequent years.

Starting from the fourth year, employers will allocate a portion of the unified social tax to the accumulation contribution in the amount of the accumulation contribution, but only if the employee pays an additional accumulation contribution from his or her own income. If the employee refuses to pay the additional accumulation contribution, employers do not separate the accumulation contribution from the single contribution.

The mandatory unified social contribution for employers is paid by employers as part of the unified social contribution and is separated in the unified social contribution reporting. The compulsory accumulation contribution for employees and the additional accumulation contribution are not a single contribution.

Individual entrepreneurs and other categories of "self-employed persons" who pay the accumulation contribution in their favor pay accumulation contributions on a voluntary basis.

The draft law proposes a combined model of the funded pension system. It stipulates that for the first 3 years, the accumulation contributions will be transferred to a state fund that will have a corporatized management structure that is in line with EU Directive 2016/2341, which Ukraine has committed to implement. Starting from the 4th year, participants will be able to choose a private pension provider (non-state pension fund, life insurance company, bank) or, if they wish, remain in the state fund.

The legislation on funded pension provision is expected to come into force on January 1, 2026, and the start of savings is expected to be a year after the end of martial law, but not before the entire regulatory framework and necessary infrastructure is in place.