Every year, Ukraine carries out March indexation, due to which pensioner payments increase – usually by not very significant amounts.
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Why the amounts are insignificant, and what needs to be changed in the mechanism for increasing payments, Danylo Hetmantsev, the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, said on the social network.
The People's Deputy recalled that pension indexation, the goal of which is to preserve the purchasing power of pensioners, has been carried out in Ukraine every year since 2019.
Two factors affect the amount of payments:
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- rising consumer prices (inflation);
- growth in the average wage in the country.
This mechanism for recalculating payments is provided for by the Law of Ukraine “On Mandatory State Pension Insurance”. However, the Cabinet of Ministers of Ukraine has provided for a different mechanism for indexing pensions. According to it, the average wage rate valid as of October 1, 2017 (which is 3,764.40 hryvnias) is increased by the appropriate coefficient, and not the average wage rate, which was taken into account when assigning and calculating pensions starting from 2018.
If the average salary taken when assigning a pension is higher than the indexed “baseline”, then the pension was not indexed.
Because of this, everyone who retired in 2019 became eligible for pension indexation only in 2023, since it was this year that the indexed “baseline” exceeded the average salary from which the pension was assigned four years earlier.
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Due to this mechanism, pensions assigned in 2021-2024 are not indexed. And although the government “compensated” for the shortcomings of indexation by establishing additional payments to pensions, pensioners still lose money, because the current indexation formula devalues pensions over time.
In addition, the problem is that only the basic pension amount is indexed, while allowances, supplements, and other components are transferred according to different rules and at different times.
In addition, if a pensioner continues to work but receives a lower salary, his earnings coefficient may decrease, and with it his pension after the next calculation.
That is why, according to Hetmantsev, the pension indexation mechanism needs to be revised. In this regard, the Verkhovna Rada, based on the results of consideration of the draft state budget for 2026, instructed the Cabinet of Ministers to submit a draft law on unified approaches to indexation on general terms by July 1, 2026.
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As a reminder, the Pension Fund named two indicators that affect pension increases.
