Investment potential of non-state pension funds in Ukraine

Valentyna Tropina,Natalia Yevtushenko,Mariia Rippa,Tetiana Rybakova,Viktor Melnyk

doi:10.21511/imfi.18(2).2021.07

Abstract

World practice shows that non-state pension funds (NPFs) are not only a tool for supplementary pensions, but also a source of significant investment in the economy. This study aims at determining the investment potential of 65 Ukrainian NPFs currently functioning in the country. The analysis of Ukrainian NPFs has shown their insignificant role as an investment resource (the volume of their assets is 0.09% of GDP). At the same time, NPFs operate with significant funds (UAH 3.1 billion in 2019), but the lack of a developed stock market and effective financial instruments in the country narrows the opportunities for their investment activities. A study of the structure of NPF assets allocation showed that it is far from optimal in terms of investment portfolio diversification and is very conservative – almost 85% of invested NPF assets are government guaranteed securities and funds in bank deposit accounts. But in the context of tightening the requirements for disclosure of information on the activities of NPFs, promoting the stock market development, formation of reliable mechanisms to protect depositors’ pension savings,and formation of an effective investment portfolio, NPFs in Ukraine

Highlights

Non-state pension funds are an important segment of the modern financial system, performing financial, investment, and social functions
World practice shows that non-state pension funds (NPFs) are a tool for supplementary pensions, and a source of significant investment in the economy
This study aims at determining the investment potential of 65 Ukrainian NPFs currently functioning in the country

Summary

INTRODUCTION

Non-state pension funds are an important segment of the modern financial system, performing financial, investment, and social functions. The financial function of NPFs is their ability to accumulate a significant amount of savings in the form of voluntary pension contributions and convert them into investments. The investment function is that the NPF system can form a powerful long-term investment resource, which the Ukrainian economy desperately needs. Over the years since 2005, the private pension system in Ukraine has not achieved significant success: the number of participants is only 5.3% of the labor market, the ratio of NPF to GDP is 0.1%. The current state of private pension provision in Ukraine intensified the discussion on the effectiveness of investment activities of NPFs in Ukraine and in general on the future prospects for their development.

LITERATURE REVIEW

DISCUSSION

Findings

CONCLUSION