“Can contributors to non-state pension funds count on wartime income and what happens to the money in the long run?”, — write: www.epravda.com.ua
The impact of the war on the demographic situation, in particular large-scale emigration, calls into question the sufficiency of solidarity pensions for a non-poor old age in the future.
With this in mind, the introduction of a mandatory accumulated pension system causes heated discussions about the mechanisms of accumulation and their results.
In Ukraine, a non-state pension system has been operating for 20 years, which enables citizens to accumulate funds for their pension in the future.
For the third year already, our country is in a state of great war with the Russian Federation. Events related to it have a terrible effect on all aspects of the economy. Everyone is afraid of inflation and rising prices. So is it possible to start saving now? The short answer, based on analysis and numbers, is yes. It is possible and worth it.
In total, the assets of non-state pension funds (NPF) on June 30, 2024 amounted to UAH 5.217 billion. The largest, NPF NBU, had UAH 2.255 billion (43% of all pension assets), the second place in terms of assets was occupied by NPF “OTP-pension” with assets of UAH 563 million, and the third place – “Privatfond” with assets of UAH 477 million.
About 900,000 people became members of the NPF, of which 94,000 people received or are receiving pension payments, the amount of which for the entire period reached 1.7 billion hryvnias.
In 2022, there was crazy inflation – 26.6%, in 2023 – 5.1%, and for six months of 2024, this indicator was 4.3%. 2022 was a shock year for the financial market, so pension funds could not show a better result.
However, in the following years, government bonds, together with bank deposits, gave a fairly high yield, which affected the yields of the NPF. Here are the results of the largest funds compared to inflation during this time.
NPF
assets,
June 30, 2024,
thousand hryvnias
Number
participants
Yield*, %
2022
2023
June
2024
NBU
2,255,200
12,648
8.15
20.68
9.41
“OTP pension”
562,759
64,097
4.01
17.60
8.31
“Privat Fund”
477 258
51 175
11.48
14.07
7.16
Ukreximbank
421 554
6,205
14.38
20.42
10.39
“Emerit-Ukraine”
304,661
69,341
8.37
19.36
9.98
“Dynasty”
252 425
42,015
8.70
21.30
10.67
Annual inflation
26.6
5.1
4.3
* In bold – below inflation, in regular – above inflation
As we can see, in a critical year of upheavals, no fund showed higher results than the inflation rate. However, during a period of moderate inflation, all funds outperformed inflation. That is why it is advisable to compare inflation and profitability over a longer period of time. Below are the results of the same funds for 15 years, from 2009 to June 30, 2024.
NPF
Profitability, %, 2009-2024
“Privat Fund”
859.0
Ukreximbank
845.6
“Emerit-Ukraine”
812.9
“Dynasty”
693.7
“OTP pension”
662.5
NBU
527.8
Inflation for the period, %
438.7
“Dynasty” has been operating since 2013, and “OTP-pensia” – since the end of 2009, but even under such circumstances, these funds show better dynamics than inflation. During this time, the dollar exchange rate set by the NBU has changed almost as an inflation indicator: from UAH 7.7 at the end of 2008 to UAH 40.54 on June 30, 2024, that is, it has increased by 426.5%.
You might think that for high results, management companies use high-risk, most profitable instruments. However, the assets allowed for investment in the NPF are strictly regulated by law.
These can be securities traded on the stock exchange, bank deposits or real estate. If we look at the general structure of NPF assets, it becomes clear that standard instruments with fixed income are mainly used: government bonds (OVDP) and bank deposits.
Structure of NPF assetsMarch 31, 2024
Therefore, the use of standard investment instruments gives a good result, and their yield outpaces inflation over a long period of time. What is needed for long-term retirement savings. Maybe it’s time to save for retirement?