Recently announced reforms to Poland’s pension system are just the latest in a long line of changes made over the past eight years. Unfortunately, the majority of these have been motivated by short-term goals (either fiscal or political), without looking at the long-term stability of the pension system. Sadly, the current changes follow the same pattern. After lowering the retirement age to 65 (for men) and 60 (for women) and announcing discretionary one-off payments for pensioners before this year’s European and parliamentary elections, the current government has now announced plans to abolish the pension system’s mandatory capital pillar.

The Polish pension system used to have three pillars: a PAYG scheme (ZUS) with mandatory a contribution of 12.22 per cent; a capital pillar (OFE) with a mandatory contribution of 7.3 per cent; and a voluntary third pillar (IKE, IKZE). Previous governments have weakened the OFE, redirecting the great majority of mandatory contributions toward ZUS and taking over half of OFE assets. Different justifications were given, but the main goal was purely fiscal – to increase general government revenue. There was also a second issue – how to pay pensions from the capital pillar. Without a private market for annuities it was decided that ZUS will gradually take over individual pension savings from OFE for a period of 10 years before retirement (suwak bezpieczeństwa) and then pay the pension. As a result the importance of OFE diminished, contributions directed towards it became tiny (around 0.2 per cent GDP), but assets under their management still remain significant (around eight per cent of GDP).

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