By Olzhas Auyezov

KIEV, Sept 30 (Reuters) - Those who think the French pensionsystem is bloated should take a look at Ukraine, a nation whichhas not only preserved but enhanced generous Soviet retirementbenefits -- which now threaten to bankrupt it.

Street protests might come easier to the French than they doto the Ukrainians. But the government of President ViktorYanukovich, who is being urged to raise the retirement age to 65years for men and women, is still wary of a possible backlash.

Relatively small on an individual basis -- about $140 amonth on average -- total pension expenditure is a big burden onthe ex-Soviet republic's budget, making up 18 percent of grossdomestic product in 2009, one of the highest rates in Europe.

Ukraine's ageing population means the system's financingneeds will only increase unless it is changed. There are alreadynine pensioners for every 10 working people paying into thepension fund in Ukraine -- and this ratio is set to get worse.

"No system can withstand those demographic trends," saidMarcin Swiecicki, director of EU-sponsored think tank BlueRibbon Analytical and Advisory Centre. "This would be afinancial catastrophe."

The World Bank said in a report this month that fiscalreform, which includes an overhaul of the system, was "the mosturgent priority" for Ukraine.

"The unreformed pension system and Ukraine's ageingpopulation threaten short-term fiscal stability (with growingdeficits that are becoming unfinanceable) and long-termsustainability," it said.

Ukraine was taxing payrolls at 35 percent in order tofinance pensions -- "one of the highest rates in the world",Swiecicki said.

GROWING BURDEN

But even that is not enough. Without reforms, by 2050,Ukraine will have to reduce its average pension to 28 percent ofthe average wage from the current 40 percent.

And if it wants to keep pensions at the same level, thenation will have to raise the retirement age to 65 years forboth men and women. Under the current rules, Ukrainian men canretire at 60 while women retire at 55.

"Ukrainian women hold the world record in correlationbetween the length of retirement and the work period needed toobtain a pension: 7.1 years of staying retired for every 10years of work," Swiecicki said.

That compares to 6.2 years in Italy and just 4.6 years inGermany, according to Blue Ribbon data.

Opponents of change say earlier retirement in Ukraine isjustified by the fact that life expectancy at birth in Ukraineis 7.8 years shorter than in the EU for women and 13.3 yearsshorter for men.

Among other worries are the disparity between pensions indifferent sectors -- miners and military officers, for example,enjoy much higher benefits than an average pensioner -- and thefact that only 75 percent of workers pay pension contributions.

"BIG RISK"

In his long-term reform programme announced this year,President Viktor Yanukovich promised to radically change thepension system by switching to an accumulative system used incountries like Chile and ex-Soviet peers Russia and Kazakhstan.

But the government has so far committed only to graduallyraising women's retirement age to 60, as spelt out by its $15billion deal with the International Monetary Fund made in July.

It also plans to reduce early retirement benefits andincrease the qualification period for full benefits by 10 years.

"This is not a complete solution but it represents asignificant step forward," said Blue Ribbon's Swiecicki.

The plans have not been clearly articulated at home. TheYanukovich government has prudently shelved discussion of theissue until after the October 31 regional elections so as not todamage his Regions Party's prospects at the poll.

However, signalling that even modest reform plans could bereviewed, Deputy Prime Minister Sergei Tigipko said this monththe government would try to avoid retirement age adjustments --a policy that could displease the IMF.

"If we find ways to compensate (growing pensionexpenditures) without raising the retirement age, we will notraise it," Tigipko told reporters.

"If we don't find ways to compensate we must stimulatepeople to continue working -- by enabling them to earn more forworking every additional year and so on."

Carrying out pension reform in a slowly growing economy was"a big risk", he added.

(Writing by Olzhas Auyezov; Editing by Richard Balmforth andRalph Boulton)