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Pension system and employment incentives Polish experience

Pension system and employment incentives Polish experience. Agnieszka Chlon-Dominczak Ministry of Regional Development Poland Bled, 7 June 2007. Polish experience. Widespread early retirement privileges in early 1990s Combined with restructuring of the economy

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Pension system and employment incentives Polish experience

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  1. Pension system and employmentincentivesPolishexperience Agnieszka Chlon-Dominczak Ministry of Regional Development Poland Bled, 7 June 2007

  2. Polishexperience • Widespreadearlyretirementprivilegesinearly 1990s • Combinedwithrestructuring of theeconomy • Led to significantincreaseinthenumber of retiredpeopleinworkingage • End of 1990s: attempts to reducetheinflow of newbeneficiaries: • Reducingoptions for earlyretirementdue to therestructuring of company (but: introduction of pre-retirementbenefits) • More strictdisabilityassessmentleading to thesignificantreduction of inflow • Downscalingpre-retirement benefit programmein 200

  3. Outcome of thepolicies:Employment of older and youngerworkers 80 70 60 50 40 30 20 10 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Employment rate(15-24) Inactivity rate(55-64)

  4. 1 800 40 1 600 35 1 400 30 1 200 25 1 000 ‘000 persons Per 100 persons aged 55-64 20 800 15 600 10 400 5 200 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Old-age pension s for people below retirement age Pre-retirement allowances Pre-retirement benefits Employment rate of people aged 55-64 Outcome of thepolicies:Beneficiaries of socialtransfers

  5. Pension reform of 1999: • Turn from defined benefit to defined contribution-based system • Benefit formula takes into account: • Accumulated savings • Life expectancy at retirement age • Increased incentives to postpone retirement decision • The longer you work, the higher the savings • The longer you work, life expectancy reduces

  6. 140% 120% 100% 80% value of retirement savings (at 65 years = 100%) 60% 40% 20% 0% 20 25 30 35 40 45 50 55 60 65 age Accumulation of pension capital • largest increases of retirement savings: at the end of working career

  7. 180 160 140 120 100 Pension index Pension in age 65 = 100) 80 60 40 20 0 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 age Old system (65=100) New system (65=100) Incentives to prolongworkng life:

  8. Labour market changesin 2004 • Tightening access to pre-retirement benefits • Mandatory activation of unemployed claiming pre-retirement benefits • Pilot programme „50 plus” • Pilot initiatives under EQUAL programme

  9. Finalremarks • Thereis a need to co-ordinatelabour market policy and socialpolicy to prolongworkinglives • Need for coherentpolicy: • Tightening one schemecanlead to increasedpressure on otherschemes • Old-age, disability and pre-retirementschemesshould be seentogether • Itismoreefficient to keep on thelabour market thanre-activate • Quickreduction of human capital inthecase of olderworkers • Life-long learning should be adjusted to thespecificity of olderworkers (traditionaltoolsusually do not work)

  10. Thank you for your attention

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