In Poland the retirement age is achieved in the age of 60 years for women and 65 for men. People who achieved the retirement age and have documented and required period of their employment (concerns only so-called “old pension” to which people born before 1949 are entitled) or those who achieved the minimal retirement age (people born after 31 December 1948 – so-called “pension according to new principles”) are entitled to a retirement.
In 1999 in Poland a pension reform was conducted. Since then three pillars of insurance make up the pension scheme:
- I Pillar
It is an individual account which is managed by ZUS (compulsory, universal, distributional, administered by the country). Pension in the I pillar is based on the distributional system which has the character of the generation agreement. It means that pensions are financed from contributions of currently working persons.
Contributions are counted in the individual account, but they are not invested and they are not making any profits, since they are automatically paid to present senior citizens. They are not inherited in the case of death. - II Pillar
Open Pension Funds [OFE – Otwarty Fundusz Emerytalny]: voluntary (compulsory, universal, capital, managed by private entities). For persons participating in the Open Pension Fund [OFE] contributions for the pension plan (19.52 %) in part are counted in the individual account led by ZUS (11.22 % accounting basis) and handed over by ZUS to the Open Pension Fund [OFE] chosen by the employee (7.3 % accounting basis). These contributions are counted in the individual account and companies are attempting to accumulate them. Collected money will be paid after achieving the retirement age. Money can be divided as a result of the spouses divorce. In case of the death of the insured person money is inherited by a person indicated at the agreement.
The insured person chooses the pension fund. People born before 1969 could choose (i.e. if they want to set about to the Open Pension Fund [OFE]), however people born after 1 January 1969 must choose the Open Pension Funds [OFE] and sign a contract, otherwise they will be randomly assigned to one of the Funds. It is individual capital that works for the future retirement. Contributions paid in the II pillar are exempt from the income tax and in the restricted grade they are liable to inheriting.
The largest Opened Pension Funds [OFE] in Poland are (according to data given for the year 2009)
Generali
PZU
AXA
Amplico/AIG
Polsat
Aegon
Allianz
Bankowy
Pekao
ING
Nordea
Pocztylion
Aviva
Warta
- III Pillar
Individual Retirement Accounts (IKE) is a part of the pension scheme which can be joined practically at any time and determine rules for participation with the great self-reliance. Individual Retirement Accounts [Indywidualne Konta Emerytalne] are voluntary and supplement the above mentioned pillars of the pension system. The manner of amassing contributions in this pillar can be different and an account holder decides upon this manner.
Deposit, capital insurance, investment fund, independent investing on the stock-market – these are only some of possibilities available.
Profits on account of saving in IKE are exempt from taxes from capital profits of amount 19%, of so-called Belka’s tax [The polish Finance Minister], i.e. the flat rate income tax on people, under the condition of making a payment after achieving the retirement age.
The level of post-retirement benefits will mostly depend on how much money professionally active person manage to collect in accounts of the II and III pillar. In the new system the work experience is unimportant, however an appropriate level of the individual insured account is required. In other words, the pension depends on the amount of the accumulated capital through the entire life. According to new principles, the accounting base for calculating the pension is the money gathered in I and II pillar from 1 January 1999. Pension will be equal to the amount resulting from dividing the amount collected on account of the projected average life expectancy for those whose age is equal to the retirement age for the insured person. At present, the average life expectancy is projected to further retirement was 220 months (for women - 250 months, whereas for men - 190)
More details about the principles of the pension scheme operation in Poland – can be found on the ZUS website
