Financing pension system in a country in transition - Poland Zofia Rutkowska Polish Social Insurance Institution - ZUS

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension system reform New developments Future developments ConclusionsContent

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension System Reform Mixed financing Institutions – public and private Formula – –Defined contribution –Minimum pension- flat rate

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension Reform mixed financing 3 pillars –2 obligatory, 1 voluntary –1 PAYG, 2 funded 2 obligatory pillars – one PAYG, one funded Contribution 19,5% –12,2% – PAYG pillar, 7,3%- Funded pillar Funded pillar financing –Limits for investement instruments –Limits for investement abroad

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension system reform mixed financing Indexation of the contributions –First pillar – by the payroll increase (not decrease) –Second pillar – according to the financial markets’ returns, decrease of the accumulated contributions possible)

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension System Reform institutions PAYG pillar –Social Insurance Institution (ZUS) Funded pillar– for profit Pension Funds –Fee for administration –Fee for fund management –ZUS collecting contributions for funded pillar

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Pension System Reform formula – defined contribution First pillar –Individual accounts –Notional contributions from the whole employment career Second pillar –Individual accounts –Contributions from the whole employment career - invested Minimum pension – flat rate –If amount from both pillars is not high enough –Financed form the budget

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April New developments Modification of the system „Bridge” pensions Payout institution –Now –Later

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April New Developments Modification of the system Lower fees for Pension Funds –Administration (decrease from 7% to 3,5%) –Fund management Multifunds –Lower risk funds for people near retirement age

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April New developments „ bridge pensions” Rationale Who is affected Financing Results

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April New developments payout institution now Only for small number of women ZUS calculates the pension according to demography prognosis (for a given year) Pension company sends necessary amount to ZUS who makes the payment Free service till 2014 Indexation the same as in the public system The effects on the capital

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Future proposals Payout institution Contributions to the second pillar Not reformed pension systems

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Future developments payout institution In the law proposal - private companies Lately information that ZUS will take over all payments, even in the future –Separate fund, fund managers –One actuary for both pillars

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Future developments contributions to the second pillar In many countries in transition – changes concerning the second pillar Contribution to the second pillar –Proposal for decreasing the contribution (to 3%) –4,3% would be than transfered to ZUS, to a special fund

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Future developments not reformed pension systems Farmer’s system –Low benefit but also – low contribution –Financed mainly form the budget Disability pension system –Benefits likely to be higher than the old age pensions Possible trend to avoid the reformed pension system

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. – April Conclusions Well developed institutions for collecting contributions Payout institution under construction Plans for reforming farmer’s pension and disability pension system *Discussion about the financing of the whole system