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Vitalii Lomakovych, the founder and chairperson of the board of the Growford Institute, believes that the government should carry out a pension reform, despite the poor conditions for its implementation.

“Now there are almost the worst starting conditions for a pension reform that is long overdue,” he said at a roundtable on “Pension Reform in Ukraine: To Be or Not to Be” at the Gorshenin Institute.

“I was involved in the creation and launch of the first private pension funds, asset management companies. I even remember when the State Pension Fund was in surplus. Then, there were perhaps the best preconditions for the introduction of an accumulative pension level, which happened, in principle, in most countries of Central and Eastern Europe. But, unfortunately, the time was lost, and now we have negative starting conditions. The government should have great courage to take responsibility for the pension reform, but it must be done,” he added.

According to him, the pension reform is designed not only to improve the social welfare of citizens, but also it can be an important factor in de-shadowing the economy. “There are three types of contributions: of employee, of employer and of state. If there is a contribution from the state, then people who are unofficially employed will think hard. Therefore, this reform may also have the effect of de-shadowing,” he said.

The expert emphasized that the key problem of accumulative pensions was to preserve the purchasing power of savings. “In this aspect, the reform is tied to a very prudent and correct monetary policy of the National Bank of Ukraine, so that savings are not “eaten” up by inflation. This requires fiscal and monetary efforts of the authorities,” Lomakovych said.

At the same time, he stressed that strict requirements had already been set for non-state pension funds, which provided a conservative but stable contribution income. “No private pension fund has yet gone bankrupt, unlike a hundred banks during the bankruptcy,” Lomakovych added.