Ukraine's capital market needs personal investment accounts and pension savings – Univer Group head
The top priorities for developing Ukraine's capital market are the launch of personal investment accounts and a funded pension system, while market infrastructure is of secondary importance, according to Taras Kozak, founder and president of Univer Investment Group – one of the country's leading investment firms.
"Our problem isn't infrastructure – it's capital. Ukraine lacks capital, especially domestic capital. The main driver of capital market development in Ukraine is domestic money. And there are two ways to turn that into capital: personal investment accounts and a funded pension reform," Kozak said in an interview with Interfax-Ukraine.
He noted that attempts over the past decade to legislatively introduce global best practices for personal investment accounts in Ukraine have failed. He recalled that the latest legislative proposals aimed to allow investments of up to 300 minimum monthly wages (currently UAH 2.4 million) in Ukrainian securities through such accounts, with exemption from personal income tax and the military levy – provided the money and investments remained in the accounts for over three years.
Kozak added that the draft law also includes a provision for a long-term seven-year account with no cap on the investment amount.
He identified the second main source of domestic capital as the funded pension reform. Based on annual payroll exceeding UAH 3 trillion, even a 3% contribution would yield around UAH 100 billion a year in resources – plus investment income.
"There are currently UAH 1.85 trillion in government bonds outstanding. But once businesses – like OKKO or Nova Poshta – see that such a resource exists and that some of it can be invested not just in government bonds, but also in stocks and bonds of the real economy, they'll try to create financial instruments to attract those funds," Kozak said.
He argued that the Finance Ministry is opposing personal investment accounts, citing potential revenue losses. However, there are no precise calculations of current tax revenue from individual securities investments, and the ministry itself uses tax exemptions to attract retail investment in government bonds, but not for real-sector instruments.
"The Finance Ministry has led us into a dead end. Conversations always end at 'let us think about it.' I don't have exact forecasts on how much money the accounts would bring to the market, but it's tens of billions of hryvnias per year, plus UAH 100 billion from pensions. That's $3–4 billion annually in long-term capital that would be continuously working for Ukraine's economy," he explained.
He noted that in the United States, such accounts hold more than $10 trillion – driven by tax incentives that encourage domestic investment.
Commenting on the capital amnesty proposal – suggested by OKKO Group CEO Vasyl Danyliak at a recent government-business forum, in response to the lack of a functioning stock market – Kozak voiced support. He said the idea closely resembles the concept of personal investment accounts. However, he expressed skepticism about its feasibility due to Ukraine's international obligations under the FATF to combat money laundering.
"Unless Ukraine is granted temporary relief from these requirements due to the war and reconstruction – perhaps for 5 to 10 years," he added.
Kozak lamented that Ukraine's leadership currently views the stock market as insignificant.
"They still recognize government bonds, because that's budget financing. So the National Bank and Finance Ministry are involved in that – even launching government domestic loan bonds sales through the Diia app. But everything else? They see it as ill-timed," the investment banker said.
He recalled a comment made by then-Prime Minister Denys Shmyhal in May 2020, shortly after taking office, when he said that Ukraine's lack of a stock market was a crime.
"But apparently, even the Prime Minister's strong will wasn't enough to get it off the ground. From a capital markets development standpoint, nothing has really changed. You can blame Covid, then the war, but we're essentially still at square one," Kozak concluded.
Still, he emphasized that he believes in the potential for developing Ukraine's stock market.
"Ukrainians are naturally inclined to invest: they invest heavily abroad, they invest in government bonds. When they trust the system and know their interests are protected – they invest," he said.
"In my view, the solution lies not in developing infrastructure, but in creating these two sources: personal accounts and a funded pension system," Kozak reiterated.
