The changes relate only to the Ukrainians, who will be at the age less than 35 as of that moment. They will continue participating in the joint pension system, but a part of their deductions will be necessarily transferred to one of the existing non-governmental pension funds in the country. All the others will be able to participate in this scheme of accumulation voluntarily. The law will help to regulate the market of "long-term" deposits of population, according to LIGA.net financiers interviewed. Life insurance companies are considered to be the main competitors of the NGPFs in this segment. A more complex and expensive alternative is withdrawal of funds abroad.
There are not so many options for pension forming for the Ukrainians, and most of them will be applicable only to people with medium and high incomes, Kozak said.
“There are only the first and third levels of pension system - a joint system and voluntary savings - now in Ukraine,” Kozak notes. – “The second level may appear in 2019, but it is not able per se to provide the Ukrainians with normal pensions, the citizens need to understand the benefits of savings at the third level.”
Insurance companies operating in life insurance field are the main competitors of the non-governmental pension funds now. About 500 000 persons have universal life insurance policies in the Ukraine,” says the Chief Executive Officer of PZU Life Insurance - Zbignev Sholyga.
“The average term of accumulative insurance contracts in our company is 20 years,” - says Sholyga. “The essence of such programs is that the IC pays the client an accumulated amount plus additional investment income if he is alive as of the end of the insurance agreement term, or in the event of his death - within the period between commencement of the agreement and the date of its termination”.
The contributor of the IC may terminate the agreement ahead of schedule, but in this event he has losses in investment income (it becomes the maximum as of the date of the agreement termination), says Alexander Melnichuk, Chief of the Foreign Communications Department of the INGO Ukraine. If a person refuses the services of an insurance company within the first two or three years, only a portion of the funds already invested will be returned, adds Melnichuk.
The law obliges insurance companies to guarantee the customer a minimum investment income of 4%, says Melnichuk. The amount of the additional investment income depends on success of investment activities, but, as a rule, we are talking about an additional 10-20%, he notes.
“Profitability of insurance programs is usually lower than the NPF,” says Dyshlovoy from OTP Capital. “But the main difference is in the purpose: benefits can be obtained earlier in an insurance company and spent prior to the retirement age.”
The insurance companies consider this nuance as an advantage: people who buy life insurance policies understand that this is not a tool for long-term investments, but the insurance coverage in the event of unforeseen circumstances; banks and the NGPF do not provide it, Sholyga notes.
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