The pension strategy in Poland faces serious challenges – warns ZUS president Zbigniew Derdziuk. In an interview with money.pl, it points to the expanding burden on the contribution strategy and the problem of people who avoid paying contributions. What solutions are proposed, and why could the situation deteriorate in the next decade?
Defined contribution strategy – fair but at risk
The president of ZUS emphasizes that the current pension system, based on a defined contribution, is fair due to the fact that the amount of pension depends on the contributions paid. However, the problem is the increasing number of people who do not pay them.
"We stand ahead of the dilemma: we will either implement a strategy of defined contributions and motivate citizens to act and save on the account in ZUS, or we will gotta control to a more simplified model, due to the fact that for demographic reasons Poland will not be able to pay large replacement rates" – Derdziuk says.
Why will pensions be lower?
Currently, pensioners benefit from the alleged first capital, which takes account of their professional activity in the erstwhile scheme. In the next decade, however, the situation may deteriorate.
"Today's retirement age groups receive pensions, part of which is first capital. Today, the replacement rate for people entering retirement age is 54 percent, which means they are in a beautiful good position" – explains the president of ZUS.
Who doesn't pay contributions?
Derdziuk lists groups which are presently exempt from contributions:
- Young to 26 – the exemption was introduced in times of advanced unemployment, present it is unjustified.
- Unemployed – do not rise pension capital.
- Persons on sick leave – the period of illness is not counted as a pension.
Women lose the most
A peculiarly serious problem concerns women who opt for motherhood.
"If we compare a man and a female starting work in the same year with the same income and a female giving birth to 1 kid and taking maternity and parental leave, her capital at 59 is 3.2 percent lower than a man. If he has 3 children, the capital is almost 10% lower” – explains the president of ZUS.
‘Gap-driving’ — pensions for a symbolic contribution
Derdziuk pays attention to those who have barely paid contributions and yet receive pensions.
"We have cases of people with 1 or 2 contributions, which have a benefit called a pension, although this is not a full pension. In the fresh pension scheme, only 1 contribution paid in life can be calculated. We have cases where the calculated benefit is little than 10 grosz” – he says.
Examples? The female from Bilgoraj who worked one day, and the man from Wrocław who worked one month They both collect pensions. In addition, if the capital raised is besides low, the difference is paid by the state budget in the form of minimum pension.
What about the pension system?
The president of ZUS indicates that changes are necessary:
- Elimination of unjustified exemptions (e.g. for young people under the age of 26).
- Greater motivation to save in the defined contribution system.
- Fight against ‘freeriders’who do not pay contributions and then usage the system.
If reforms are not implemented, Poland may not bear the costs of pensions in the future.
More here:
The collapse of the pension system? president ZUS warns against “gap eaters”
