Ukraine’s Pension System Faces Collapse Due to a Critical Imbalance

Current State of Ukraine’s Pension System

According to ХВИЛЯ: Economist Oleh Ustenko has assessed Ukraine’s pension system, highlighting serious flaws in its operation. At present, there are roughly 10.2 million retirees and about 10.7 million employed individuals in the country. The ratio of pensioners to workers stands at one-to-one-a much worse figure than what is seen across European nations. A pension system is considered dangerously strained when there are only 13 workers for every 10 retirees. Ukraine’s ratio is even lower, raising significant alarm.

According to Ustenko, the system stays afloat only because payouts are extremely low. The average pension in Ukraine equals one-quarter of the average salary, whereas in the European Union, that figure ranges from 40 to 50 percent. In countries like Luxembourg and Ireland, there are 4.5 to 5 workers per retiree. Poland has two workers per retiree, and the EU average is roughly three workers for every pensioner.

Funding and Potential Solutions

In 2026, the state transferred approximately 200 billion hryvnias to the Pension Fund, which amounts to at least 2.5 percent of gross domestic product. Ukraine’s shadow economy exceeds 30 percent, further straining pension financing.

The economist warns that without action, 'we risk the pension system simply collapsing.' - Oleh Ustenko

Ustenko outlines several possible-though all unpopular-ways to address the crisis:

• cutting or capping pensions
• raising the unified social tax
• increasing the retirement age

Some countries have already taken such steps. Germany is raising its retirement age to 67, France to 64, while Poland sets it at 60 for women and 65 for men.

Discussions also touch on introducing a funded pension tier, which could partially solve the problem. However, the third level-private pension funds-faces a trust deficit among the public. Ustenko emphasizes that 'in Ukraine it’s one-to-one, while in Europe it’s one-to-three.'

Ukraine’s pension system is in critical condition, and its future depends on bold decisions. Low benefits and an unfavorable worker-to-retiree ratio demand urgent reforms-whether through higher social contributions or changes to the retirement age. Given the large shadow economy that deeply affects funding, effective solutions must be found to ensure the stability and reliability of Ukraine’s pension system.