For information on who will see an increase in pensions this year and by how much, read the overview by journalist RBK-Ukraine Alik Sakhn. This is reported by Kontrakty.UA.
Who and when will pensions be recalculated
In 2025, pension indexing will traditionally take place on March 1. This recalculation has been automatic since 2017, when pension reform was implemented. As part of the reform, it was established that starting March 1 of each year, pensions for the elderly are increased in accordance with the level of inflation and the growth of the average salary from the previous year.
Before this, pension recalculation was not mandatory – indexing was at the discretion of the state, depending on its financial capabilities. At the same time, the law included a provision that allowed, but did not require, indexing to be carried out.
"In 2017, the law clearly stated: mandatory pension increases occur every March 1, and a formula for this process was established. Thus, regardless of the political situation in the country, pension indexing occurs without changes. This has become a legislative requirement that the government is simply obligated to fulfill, even in the case of martial law," – commented former Minister of Social Policy of Ukraine Pavlo Rozenko to RBK-Ukraine.
This category includes citizens of Ukraine whose pensions are calculated according to the Law on Mandatory State Pension Insurance, i.e., the so-called solidarity insurance pension. This pertains to labor pensions calculated in accordance with the provisions of this law.
According to Rozenko, special and other pensions regulated by separate laws may be indexed at the government's discretion, including military pensions, as was done last year. However, mandatory indexing applies specifically to labor pensions, which are paid to the majority of Ukrainian pensioners – about 95%.
The draft budget of the Pension Fund of Ukraine allocates 44.7 billion hryvnias for supplements determined by the Cabinet of Ministers' resolutions on pension indexing and additional measures to enhance the social protection level of the most vulnerable segments of the population.
How much can pensions increase
Pension increases will be made according to the formula specified in part two of Article 42 of the law "On Mandatory State Pension Insurance." For the calculation, 50% of the inflation from the previous year and 50% of the growth rate of salaries in Ukraine for the same period are taken into account. The sum of these two amounts determines the percentage by which the pension will be indexed.
Indexing applies not to the entire pension but only to its basic amount, yet even this increase is significant. The budget of the Pension Fund for this year included indexing at the level of 10%. However, on February 18, the Pension Fund of Ukraine approved the average salary indicator for 2024, from which insurance contributions were paid and which is used for pension calculations.
This figure allows for the determination of the pension indexing coefficient, which will be 1.115. According to the Pension Fund's data, the average salary in 2024 was 17,486.60 hryvnias, which is 22.2% higher compared to 2023 (14,308.46 hryvnias).
"Last year, inflation was 12%, which gives 6% for indexing (50% of inflation - ed.). Salary growth is assessed differently, but the minimum is 16%, which gives 8%. In total, this is approximately 13-14% indexing. These indicators are always approved by the government in a resolution based on data from the State Statistics Committee and the Pension Fund by February 20. After that, by the 25th, the Pension Fund automatically recalculates pensions, prepares payment information, and sends it to the treasury. Starting March 1, people will begin to receive their recalculated pensions," – explains Pavlo Rozenko.
At the same time, Rozenko adds that although in October-November 2023 the authorities announced plans to include a 13% pension increase in the budget for 2024, when the government resolution was released, it stated that pensions would be indexed only by 7.9%. Therefore, in the politician's opinion, it is possible that the figures may differ this time as well. However, he adds that there are good chances to see the actual figures.
Typically, the government in its resolution determines the minimum and maximum amounts of supplements. For example, in 2024, the minimum supplement was 100 UAH, while the maximum was 1500 UAH. Moreover, indexing applies only to that pension calculated according to the main formula (excluding additional supplements, guarantees, etc.).
The amount of the pension supplement depends on the calculated pension amount a person has, not on the actual payment. For instance, if indexing is at the level of 10%, then Ukrainians may receive the following amounts added to their pensions:
- those whose calculated pension is less than the minimum pension (2361 hryvnias) will receive a minimum supplement of 100-200 hryvnias;
- Ukrainians with a calculated pension from 3000 to 4000 hryvnias could receive supplements of 300 to 400 hryvnias;
- similarly, those with a pension up to 5000 hryvnias could expect supplements of 400 to 500 hryvnias.
Increases of over 1000 hryvnias will be received by those whose calculated pension exceeds 10,000 hryvnias. Thus, the amount of the pension increase depends on the calculated pension amount, and the most significant increases will be received by those with pensions higher than 10,000 hryvnias.
Who will not receive an increase
Pension indexing does not apply to individuals who retired after January 1, 2025, as their pensions have already been calculated based on current salaries, and therefore there is no need for additional adjustments.
It is also noted that pensions granted in the last three years are not subject to indexing, since calculations are based on the current salary level. However, a small supplement (for example, 100 hryvnias) may be established for such pensioners, as was done in previous years.
Indexing will also not affect pensioners whose pensions exceed 10 living wages, which amounts to 23,610 hryvnias. This means that if a person's pension approaches or exceeds this amount, they will not receive indexing, as it is considered that such a pension amount is sufficiently high to compensate for inflationary changes.
Will these funds be enough for living
The head of the expert-analytical council of the Ukrainian Analytical Center, Boris Kushnirok, notes that while the automatic pension recalculation mechanism introduced in 2017 is significantly better than the previous manual system, the actual amount of recalculation is insufficient to ensure a decent living standard.
"The problem is that this calculation, which takes half of the salary index and inflation, does not work quite correctly because the consumption structure of elderly people is entirely different than the average 'across the board'. From a social justice perspective, we should focus not only on the overall index but also consider the consumer expenditure index for low-income individuals, as this category feels the highest inflationary pressure," – emphasizes Boris Kushnirok in a comment to RBK-Ukraine.
According to him, prices for goods and services for low-income individuals rise much faster than the average in the country. This is because their expenses mainly consist of basic products and services, such as food, utilities, medications, and medical care. At the same time, the overall consumer price index includes goods and services that low-income Ukrainians cannot afford. Therefore, Kushnirok adds, the actual inflation for this population group is significantly higher.
"The issue is that the consumer price index data used until 2021 remained unchanged, and due to the full-scale war, they have become outdated. Moreover, even the indicators from 2021 were incorrect, as the methodology was flawed in terms of regional distribution. I won't even mention the issues in commodity groups, but even the analysis at the regional level was far from reality," – explains the expert.
Furthermore, the head of the expert-analytical council of the Ukrainian Analytical Center adds that incomes in Kyiv were 50-60% higher than in other regions, which significantly impacted the consumption structure. He states that the lower the incomes in the regions, the larger the share of expenses goes toward basic products, medications, and utilities, which requires a different approach to assessing expenses and actual inflation for different population groups.
Let’s remember how inflation erodes savings in hryvnias and where it is better to keep money: in currency, in a deposit, or in government bonds.