Non-state pension funds as institutional investors: trends and development problems

The state is not able to provide pensions and normal social living standards for non-working pensioners. Financing of the Pension Fund of Ukraine deficit in 2017 from the State Budget of Ukraine is planned at the level of 141.3 billion UAH, which is almost 50% of the total amount of funds in the Pension Fund. In 2003, the Law of Ukraine 'On non-state pension provision' was adopted in Ukraine, which should have been an impetus for pension reform through the launch of personal pension accumulation mechanisms. Non-state pension funds are characterized by a policy of forming a portfolio of investment instruments of the lowest risk, but the main condition is the receipt of investment income, which would not only ensure the growth of pension assets, but also protect of funds from inflationary risks. Pension funds, in turn, operating large volumes of assets, should become, for the financial market, the largest so-called institutional investors, who will offer the market large and long-term financial resources. The share of return on investment in NPF assets and the return on investment both have decreased in recent years. The reasons for the decline in the profitability of NPF investments were the result of the following factors: revaluation of own assets after the change of the listing rules of the trade in the companies' shares, and the loss of NPF deposits in non-payment banks. In Ukraine, there are no tools that could guarantee an adequate return with a high level of reliability. There are no high-quality corporate securities on the market, and the level of return on deposits does not exceed the level of inflation. The introduction of the second level of pension reform does not make sense without the reform of the financial system and the stock market and without the formation of a complete system of prudential supervision and regulation of the activities of the NPF and their administrators. An important factor for the reform of the pension system should be the clear orientation of the authorities for macro-financial stability, support for an efficient and stable banking system, and support for the development of insurance business.