Transcript Slajd 1 - cmkos.cz

Old-age pension system situation
in Poland
Michał Polakowski, PhD
Basic structure of old-age pensions
system in Poland
• 2 schemes: salaried workers, farmers
• Structure of the salaried workers scheme
Financing and organizational
principle 1st tier
Financing and organizational
principle 2nd tier
Financing and organizational
principle 3rd tier
Retirement age men/women
NDC Mandatory
Return guarantees 2nd pillar
Internal sector return rate
Contribution
Funded Mandatory
Funded Voluntary
65/60
19,52%: 12,22% 1st pillar,
7,30% 2nd pillar
Old-age pension in Polandassumptions of the 1999 reform
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Make the retirement system transparent
Make the retirement system more fair
Make the retirement system more efficient
Make the retirement system financially stable
Old-age pension in Polandassumptions of the 1999 reform
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Induce the economic growth
Increase the level of saving
Encourage Poles to work legally
Increase the freedom of choice
Speed up the process of privatisation
2nd pillar organisation
• Private pension funds (OFE)
• Run by Pension Fund Society (PTE), joint-stock
company
• No regulation on annuities companies so far
• Savings can be partially inherited
• Mandatory for individuals born after 1968,
voluntary for 1949-1967 cohorts
Old-age pensions in Polandearly performance
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20% higher than expected inflow of members
Extensive marketing in the second pillar
‘Dead accounts’
Problems with IT system-identification of
contributions
• Unregulated distribution fees: 5.8%-10% of
contributions
2nd pillar-Number of accounts
Deviations from the 1999 reform
• Preferential treatment for ‘uniform’ groups and
miners
• Prolonged early retirement
• Teachers
• Reduction of the disability scheme contribution
• Additional costs: approx 20% of pension spending
• Small interest in the voluntary saving
• Weak regulation of the 2nd pillar
Behaviour of the 2nd pillar companies
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Internal rate of return for the sector
Loss-costs imposed on PTEs
Risk-aversion, maximal charges
Similar investment strategies
High concentration
Extensive canvassing in the secondary marketup to 50% of costs
2nd pillar distortions: oligopoly?
2nd pillar during the economic
slowdown-assets
Post-crisis reactions
• 2008: the slowdown consumed the 1999-2007
gains
• At the same time, PTEs yielded high gains
• 1st wave of regulation in June 2009
• Decrease of a transfer charge from 7% to 3.5%
• Ceiling on the management fee of PTEs
Financing transition
Problems with financing the
transition
• Plan: To finance the transition from cuts in the first
pillar
Problems with financing the transition
• …and privatisation
• Since 2001 (except for 2004) privatisation did not
reach the plan
• Only
• State has to fill the gap by issuing treasury bonds
• The main buyer of bonds: OFEs
• The cumulated cost of rolling the debt: approx. 70bln
PLN, approx 40% of contributions transferred
Problems with financing the
transition
Portfolio of OFEs
Share of OFEs in financing public
deficit
Public finances-Maastricht criteria
• Public debt close to 55% of Poland’s gross domestic
product-which triggers saving measures. The EU
limit: 60%
• Value of contributions transferred to the 2nd pillar
equal to approx 1/3 of the public debt
• Deficit: 7.9% GDP (EU requirement 3%)
• The current system adds 2.5 percentage points to
Poland’s deficit
• It increases public debt by an annual 2 percentage
points
Public debt-social policy implications
• Public debt 55%
• no wage increases in public sector
• Pensions indexed by the increase of inflation
only
• Debt incured by transfers to 2nd pillar crowds
out other social policy needs
Reform discussions
• Ministry of Labour:
– poor performance of the 2nd pillar? Similar to
treasury bills
• Ministry of Finance:
– ease the pressure by 15% of GDP in 2011–2020
• Strategic alliance
• (‘decrase the role of unpredictable funded scheme’)
• (decrease the pressure of 2nd pillar)
Old-age pensions-current changes
• Less contribution to OFE: from 7.3 to 2.3 of gross
salary (to be increased to 3.5 in 2017)
• The remaing contribution: noted on sub-accounts in
ZUS
• The savings from the sub-account can be inherited
• The contributions collected in sub-accounts will be
indexed according to the growth of nominal GDP
Old-age pensions-current changes
Old-age pensions-current changes
• More incentives for voluntary saving-tax
deduction up to 4%
• Change of investment limits: up to 62% in
shares until 2020. Ultimately: 90%
• From 2012 no canvassing in the primary and
secondary market
Old-age pensions in Polandfurther steps?
Related to functioning of 2nd pillar
• Creation of sub-funds
• Introduction of an external benchmark for
PTEs
• Decreasing the distribution fee
• Linking management fee with the results of
OFEs
• Change the investment limits
Old-age pensions in Polandfurther steps?
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Reduction of branch privileges
Extension of retirement age
Reform of the farmers’ scheme
Reduce the poverty of pensioners: 40% of
future pensioners will have minimum
pensions!