Minimum Pension Guarantee in Poland

1
Minimum Pension Guarantee in Poland

• Zofia Czepulis-Rutkowska
• Seminar for social security actuaries and
  statisticians actuarial aspects of pension
  reform
• Moscow, Rusian Federation, 3-5 July 2002

2
The present pension system consists of three parts

• Employee pension system
• Farmers pension system
• Military and police pension system

3
These pension systems are

• Integrated with disability and survivor pension
  systems
• Pay as you go
• Defined benefit

4
The employee pension system

• Is the biggest one in terms of participants
  number and funds involved
• Was reformed
• Is the subject of this presentation

5
Present system eligibility conditions

• Mandatory retirement age 60 years for women and
  65 for men
• Insurance duration 20 and 25 years respectively

6
Pension benefit formulae

• PA0,24B0,013PWLS0,007 PWLN
• PA - pension amount
• B - basic amount
• PW calculation base
• LS contribution years
• LN non contribution years

7
High pension expenditures resulted from

• Generous formulae
• Easy access to benefits
• Beneficial indexation

8
Minimum pension - eligibility

• Eligibility to pension benefit
• Pension amount (according to calculation
  formulae) lower than the minimum

9
Minimum pension in statistics

• 6 of all old age pensioners get the minimum
  pension
• 85 of them are women
• minimum wage 143 minimum pension
• average wage 380 minimum pension
• poverty line in social assistance 77 minimum
  pension

10
The new old age pension systemreasons of
introducing

• High pension expenditures amounting to 15 of GDP
  and projections showing sharp increase in these
  expenditures in future
• Macroeconomic arguments indicating the chance to
  use the pension reform to create savings and
  sound capital market institutions

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New old age pension systemthe changes

• Old age pension system is separated from
  disability and survivor pension system
• Funded financing is introduced
• Defined benefit formulae is introduced

12
The new old age system

• Two obligatory pension pillars are introduced
• Contribution 19,52 calculation base
  (individual average wage)
• People born after 1948 have to join the new
  system

13
The first pillar

• Contribution 12,22 calculation base
• Notional capital is accumulated on individual
  accounts and indexed with 75 of the wage index
• The pension amount equals capital devided by life
  expectancy
• Administration and payment of the benefits by
  Social Insurance Institute

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The second pillar

• Contribution 7,3 calculation base
• Benefit amount depends on accumulated capital and
  annuity market
• Administration by private pension funds
• Institution accountable for benefit payment is
  still to be detrmined

15
New old age pension systemmost important safety
rules

• Separation of the pension fund assets from the
  pension fund company assets
• Required diversification of investement limits
• A minimum rate of return
• Supervision institution

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Minimum pension guarantee in the new system

• Insurance period 20 years for women and 25
  years for men providing it was full time
  employment
• Amount of benefits from two pillars lower than
  the minimum pension
• Financing from the general budget
• Administration by Social Insurance Institute

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The government libilities will depend on

• Regulation that will probably change (retirement
  age)
• Regulation that need to be clarified (institution
  accountable for benefit payment in the second
  pillar)
• Regulation to be prepared yet (bridge pillar)

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Other social security institutions that matter

• Old age system for farmers
• Disability pension system
• Social assistance