The first thing people usually pay attention to when performing a detailed analysis of a bill on the state budget is its annexes. Large tables detailing where the state plans to take money from and what exactly it wants to spend it on.
However, the “devil” lies in the text of the bill itself. The draft budget for 2025, which the Cabinet of Ministers approved on September 13 and submitted to parliament for consideration, was no exception.
In particular, the government proposes to increase the maximum size of the single social contribution (USC), as well as to withdraw money from the bank accounts of displaced pensioners if these accounts have not been used during the year.
From a sick head to a (temporarily) healthy one
For 2025, the government has envisaged a significant reduction in expenses, the manager of which is the Ministry of Social Policy. Next year they plan to spend UAH 420.7 billion on it, against UAH 470.4 billion in the plan for 2024.
Savings of almost UAH 50 billion will be achieved mainly by reducing expenses on one item - a transfer to the Pension Fund (PFU), explained Finance Minister Sergei Marchenko.
“This is a balancing element and we believe that the income from the single social contribution will be sufficient to ensure the fulfillment of the undertaken pension obligations. “I don’t see any problems in the Pension Fund fulfilling its pension obligations, taking into account other changes that we propose in the budget for 2025,” the minister noted.
Thus, the size of the PFU subsidy will be reduced from UAH 321.8 billion this year to UAH 280.2 billion in the next year’s plan.
The pension fund in Ukraine has almost always been in deficit: its own revenues in the form of unified social contributions were not enough to pay its obligations. However, during the great war this situation changed. Thanks to the fact that the state pays the unified social contribution for hundreds of thousands of military personnel, the balance of the pension fund has leveled out.
“This year, the PFU budget is deficit-free in terms of obligations that should be financed from the Unified Social Policy,” the Ministry of Social Policy reported.
However, if there is no deficit of the Pension Fund, then why does the state transfer funds from the budget to it? The fact is that the Pension Fund finances only insurance pensions, which are paid in accordance with general pension legislation. And special pensions, for example, for former judges, prosecutors, security officials or military personnel, are financed from the state budget.
Since there are much more special pensioners in Ukraine than in any developed country in the world (about 21% in Ukraine, compared to 6% in Poland, where this figure is the highest among the countries of the Association for Economic Cooperation and Development), then the costs of payments to such Ukrainians measured in hundreds of billions of hryvnia.
In 2025, the government plans to shift part of the obligations to special pensioners from the state budget to the Pension Fund. In particular, Article 39 of the state budget bill provides that the PFU will have to finance the costs of paying pensions to some former military personnel and law enforcement officers who retired after October 1, 2011.
Now the Pension Fund only co-finances pensions for these categories of persons. At his expense, one subsistence minimum established for persons who have lost their ability to work is paid (2,361 UAH). In 2024, this should cost the Pension Fund UAH 11 billion, the Ministry of Social Policy reported.
The other part of the special pension was paid from the state budget. It is precisely this that the government wants to transfer to the PFU, which explains the decrease in the pension transfer from the budget.
The Ministry of Social Policy believes that such a step as a whole will not have a significant impact on the balance sheet of the Pension Fund, since it will concern pension payments of a small number of individuals. However, ED interlocutors close to the Pension Fund call the very fact of shifting obligations for the promises of former governments from the state budget to the pension insurance system alarming.
The unified social contribution, which is paid to the Pension Fund, is an insurance payment, which subsequently gives a person the right to receive insurance compensation - a pension payment. Covering special pensions at the expense of the Pension Fund is shifting the problem from a “sick head” to a temporarily healthy one, because the lack of deficit of the Pension Fund may disappear in the event of, for example, a large-scale demobilization of the military.
However, along with additional obligations, the government proposes to transfer PFCs and additional sources of income. These sources may come as an unpleasant surprise both for Ukrainian employers and for some pensioners.
Big salaries - big contributions
The main source of the Pension Fund's own income is the unified social contribution, which employers pay for each employee in the amount of 22% of his salary. Unlike personal income tax or military duty, the ESC is not deducted from the salary, but is added on top of the pre-tax amount. That is, from the employer’s point of view, this contribution is a kind of tax on the employee.
At first glance, the ESC should be proportional: the higher the employee’s salary, the larger the contribution the employer pays for him. However, in practice this is not always the case, because the legislation limits the maximum size of the base for calculating the unified social contribution to fifteen minimum wages (currently it is 120 thousand UAH).
That is, if an employee receives 200 thousand UAH, then his employer pays the unified social contribution not from the entire salary amount, but only from 120 thousand UAH. Therefore, the contribution amount cannot exceed UAH 26.4 thousand.
In the draft budget for 2025, the government proposes to increase the maximum base for calculating unified social contributions to 20 minimum wages (up to 160 thousand UAH), and then the maximum contribution for employers will increase from 26.4 thousand UAH to 35.2 thousand UAH.
According to calculations by the Ministry of Finance, such a step will increase PFC revenues by UAH 3.3 billion in 2025. For employers, this decision will be an additional burden that they will have to bear for the decision to pay large salaries “on the white.”
Take pensions from displaced people
The most controversial norm included in the draft budget for 2025 concerns not persons with high salaries, but retired migrants.
Thus, Article 41 of the draft law on the state budget obliges Oschadbank to transfer the balances in the pension accounts of internally displaced persons opened with this bank back to the Pension Fund. This applies to those accounts of displaced pensioners in which there was no movement of funds (that is, cash withdrawals, non-cash payments or transfers to other accounts) during the last 12 months preceding January 1, 2025, that is, during the whole of 2024.
In addition, the government proposes to withdraw money from the accounts of those displaced pensioners who have not undergone physical identification within 6 months from the date such identification should have taken place.
As the Ministry of Social Policy explained to the EP, this article of the bill on the state budget concerns displaced persons registered before the start of the full-scale invasion of Russia. According to the government decree, pension accounts for internally displaced persons were opened only in Oschadbank, therefore there are no corresponding unused balances of funds in other banks.
At the same time, withdrawal of funds from accounts will not occur if these accounts are seized or otherwise encumbered.
If, after withdrawing funds from pension accounts, the immigrant decides to contact the Pension Fund or Oschadbank, the state will resume payment of the pension to such person. However, the corresponding procedure for restoring payments must still be further approved by the Cabinet of Ministers.
The EP contacted Oschadbank with a request regarding the potential number of accounts that may be affected by the specified withdrawal of funds, as well as the amount that the bank may be required to transfer to the PFU. The financial institution responded that this information is a bank secret.
At the same time, the Ministry of Finance, in response to a request from the ED, reported that the estimated amount of funds that could be withdrawn from the accounts of displaced pensioners is UAH 11.3 billion.
There is not enough money, but not for everything
The government's decision to save on pension costs could be understood in conditions where the state is critically short of funds to fight the aggressor. After all, it is precisely because of the lack of funds for defense that Ukraine is on the verge of massive tax increases in recent years.
Now the government would have to spend all its internal resources on war. It should, but it doesn't plan to. In the 2025 budget, the Ministry of Finance proposes to restore the Road Fund, in which the state concentrates revenues from the excise tax on fuel and cars.
Unlike the general budget fund, where most revenues are collected and then spent primarily on defense, the money from the Road Fund has a specific purpose - the construction and maintenance of roads.
In 2024, the Road Fund was abolished, redirecting revenues from excise taxes to the “common pot”. This decision a year ago was explained precisely by the lack of funds for defense. And although the situation with funding the army has not improved since then, the government decided to withdraw more than UAH 43 billion from the general budget fund for the road budget.
Marchenko explains the logic of this decision by the need to restore roads in front-line areas. Now these works are financed from the Budget Reserve Fund.
“The consequences of resetting the Road Fund this year is that we financed the needs of the road sector mainly from the Reserve Fund. I don't think this is a reliable enough solution. Therefore, it is more advisable to direct these funds to a separate fund in order to be able to pay off debts. There, most of the expenses go precisely to repay obligations taken in previous years,” the minister said.
This decision of the Ministry of Finance is not supported by everyone; in particular, it is criticized in the relevant committee of the Verkhovna Rada. “As a citizen, I cannot agree with the restoration of the Road Fund (in any amount, but too much - UAH 43.2 billion). By increasing excise taxes on fuel, we convinced citizens that this was a forced step and a necessity at the front.
I am still confident that every hryvnia of Ukrainian taxpayers should go to the defense of our state, because we can only use our own resources for these needs,” said the head of the Budget Committee Roksolana Pidlasa.
Lawmakers are already preparing for “fierce political battles” over the state budget for 2025. It is possible that the Road Fund will eventually disappear from the budget, and the decision to reduce pension costs will also be reconsidered.
Whether this will save the bank accounts of displaced pensioners from confiscation of funds in favor of the state - only time will tell.
