February 14, 2012
Prime Minister on pension reform
Tags: pensions prime minister social consultations
The pension reform bill was submitted for social consultations on Tuesday. - We assume they will be held for 30 days - declared the head of the government. The Prime Minister added that the bills on raising the retirement age and pensions of privileged groups should be provided to the Sejm within a month.
- I know that this decision does not spark enthusiasm, but someone has to take it. We decided that this is one of the last moments to do so - said the Prime Minister. Prime Minister Donald Tusk added that it was difficult to imagine such political conditions in which the successors of this government would decide to take this step. The head of the government underlined that he was aware that the Pension Act “might prove very costly from the point of view of the government and those who are promoting these changes”.
The Prime Minister underlined that the direct reason for commencing works on the reform was the “drastic lack of workforce” expected to occur in the 2040s. - The truth is brutal, and I would like to briefly present it with brutal sincerity - said the Prime Minister. The head of the government drew attention to the fact that demographic outlooks showed that already in 2042 more than half of the Polish population might be over 50. The current number of employed Poles reached a record high of approx. 16 million (excluding agriculture). The 1980-1984 baby boomers have already entered the labour market, which means that the number of persons fit for work can only decrease - in the years 2010-2040 it will fall by 5 million.
As a result, the relation of the working and non-working will change, and the current pension system will not suffice to protect the elder and will cease to perform its functions. Moreover, maintaining the current pension system would result in lack of workforce. - If we do not extend the retirement age, the average pension of women in 2040 will amount to PLN 2,062, and if women work longer, the average pension will equal PLN 3,411, and this is a difference of 65% - added Prime Minister Donald Tusk.
The head of the government also drew attention to the fact that if the current retirement age was upheld, then the government would have to seek funds for pensions elsewhere. According to the Prime Minister, e.g. VAT on all products would have to be permanently raised by 8 percentage points, and the pension contribution would have to be increased from 19.5% to 30% of the salary, and benefits would have to be halved. - These simulations are aimed at raising awareness of what our other options are - underlined the head of the government.
The Prime Minister added that he dedicated these data to the advocates of the referendum on raising retirement age. If the current retirement age remains unaltered, then during the referendum we must indicate what we agree to - whether it’s permanently increased VAT, i.e. higher prices, or notably lower pensions, or a radical increase in pension contributions - emphasised Prime Minister Tusk.
- The government has been preparing itself for this reform for a long time. Informal discussion on counteracting the effects of unfavourable demographic trends were held already during the previous term - said the Prime Minister.
As Minister of Labour and Social Policy Władysław Kosiniak-Kamysz said, the act would cater for an increased sense of security among current and future pensioners. He added that the Pension Bill also contained provisions regarding vocational development of persons over 60 and ensuring gender equality on the labour market.
- The proposed bill contains, e.g. provisions adjusting contribution and non-contribution periods, and levelling the insurance period entitling to minimal pension for women and men. Teachers’ compensation benefits and compensation benefit age shall remain unaltered, as well as bridging retirements and pre-retirement allowances - emphasised the Prime Minister.
The Act assumes that the retirement age for men and women will gradually be balanced and raised from 2013. The target retirement age is 67. Retirement age will be increased by one month every four months. As a result, the retirement age shall reach 67 in 2020 for men, and in 2040 for women.
A longer working period results in a higher pension, especially in the case of women. The pension of a woman who is 38 today and retires at the age of 67 in 2040 under the new system will be twice as high as the pension she would get if she retired at the age of 60.
Prime Minister on pension act (video: TVN24/TVN Agency)
The Prime Minister underlined that the direct reason for commencing works on the reform was the “drastic lack of workforce” expected to occur in the 2040s. - The truth is brutal, and I would like to briefly present it with brutal sincerity - said the Prime Minister. The head of the government drew attention to the fact that demographic outlooks showed that already in 2042 more than half of the Polish population might be over 50. The current number of employed Poles reached a record high of approx. 16 million (excluding agriculture). The 1980-1984 baby boomers have already entered the labour market, which means that the number of persons fit for work can only decrease - in the years 2010-2040 it will fall by 5 million.
As a result, the relation of the working and non-working will change, and the current pension system will not suffice to protect the elder and will cease to perform its functions. Moreover, maintaining the current pension system would result in lack of workforce. - If we do not extend the retirement age, the average pension of women in 2040 will amount to PLN 2,062, and if women work longer, the average pension will equal PLN 3,411, and this is a difference of 65% - added Prime Minister Donald Tusk.
The head of the government also drew attention to the fact that if the current retirement age was upheld, then the government would have to seek funds for pensions elsewhere. According to the Prime Minister, e.g. VAT on all products would have to be permanently raised by 8 percentage points, and the pension contribution would have to be increased from 19.5% to 30% of the salary, and benefits would have to be halved. - These simulations are aimed at raising awareness of what our other options are - underlined the head of the government.
The Prime Minister added that he dedicated these data to the advocates of the referendum on raising retirement age. If the current retirement age remains unaltered, then during the referendum we must indicate what we agree to - whether it’s permanently increased VAT, i.e. higher prices, or notably lower pensions, or a radical increase in pension contributions - emphasised Prime Minister Tusk.
- The government has been preparing itself for this reform for a long time. Informal discussion on counteracting the effects of unfavourable demographic trends were held already during the previous term - said the Prime Minister.
As Minister of Labour and Social Policy Władysław Kosiniak-Kamysz said, the act would cater for an increased sense of security among current and future pensioners. He added that the Pension Bill also contained provisions regarding vocational development of persons over 60 and ensuring gender equality on the labour market.
- The proposed bill contains, e.g. provisions adjusting contribution and non-contribution periods, and levelling the insurance period entitling to minimal pension for women and men. Teachers’ compensation benefits and compensation benefit age shall remain unaltered, as well as bridging retirements and pre-retirement allowances - emphasised the Prime Minister.
The Act assumes that the retirement age for men and women will gradually be balanced and raised from 2013. The target retirement age is 67. Retirement age will be increased by one month every four months. As a result, the retirement age shall reach 67 in 2020 for men, and in 2040 for women.
A longer working period results in a higher pension, especially in the case of women. The pension of a woman who is 38 today and retires at the age of 67 in 2040 under the new system will be twice as high as the pension she would get if she retired at the age of 60.