To show this, we ran three simulations. In the first two, we used historical data The Social Insurance Institution and the Central Statistical Office. In the third one, we relied on the list prepared by the Pension Institute. In each case, for our forecasts for 2022 and 2023, we used the indicators included in the draft budget for 2023 adopted by the government.
– A fall in the replacement rate is inevitableas a result of the transformation of the defined benefit system into a defined contribution system. Under the new system, the amount of the old-age pension depends on the amount of contributions paid and life expectancy. In the previous system, the amount of the benefit was independent of how much we would live in this retirement – points Łukasz Kozłowski, chief economist of the Federation of Polish Entrepreneurs. At the same time, he adds that the introduction of the defined contribution system had, inter alia, aimed at encouraging longer stay in the labor market. At the time of its creation, it was already known that demography did not allow the previous system to be maintained.
And so, in the case of the ratio of the average wage to the average retirement pension, we saw the last year-on-year increase in 2013. Since then, this percentage has fallen from around 54%. up to 46.7% in 2021. Our calculations indicate that at the end of this year the problem will worsen and the ratio will drop to slightly more than 45 percent, and next year, due to the already described shooting between wage increases and indexation.
On the other hand, in the case of the ratio of newly granted pensions to the average wage from 2013 to 2020, we observed a steady decline. The rebound in 2021 is a pandemic effect. Simply because of epidemic deaths, the further life expectancy has decreased, and it is this ratio that divides the sum of the capital accumulated in ZUS. We can observe a similar phenomenon this year, but if we ignored it and assumed that newly granted pensions are growing at the same pace as valorization, we would see a fall again this year and a slight rebound next.
In the scenario based on the calculations of the Pension Institute, to which we applied budget indicators for 2020 and 2023, the ratio of the average amount of pensions to the average wage will drop from over 58%. in 2015 to less than 50 percent. next year.
The calculations clearly show that regardless of the scenario and the adopted amounts, it is difficult to expect that the year 2023 will bring a pension-to-wage ratio higher than 50%, which is not good news for people who are retiring.
Problem? The problem is yet to come
Even worse news is in the expert’s judgment replacement rate it still remains at a relatively high level, as people who have worked at least several years in the old system are still retiring, which gives them the so-called start-up capital to increase the benefit.
– The real problem will appear when people born in the late 1970s and 1980s start to retire. All indications are that their replacement rates will drop to the level of 30 percent, and in the case of women it may be around 25 percent. – underlines.
Savings are the only salvation
In this situation, the rational action of professionally active people is to become interested today in how to secure their future. Łukasz Kozłowski points to three actions that can protect future retirees from real poverty after the end of their professional career.
Firstly, extending your activity on the labor market. – Our health is improving, and work causes less and less damage to the body, making it impossible to perform it for 40 years or more. Each additional year of work is 10-15 percent. higher pension, which means that after a few years of longer work, you can have at least a half higher benefit – indicates and notes that there are people in the pension system whose replacement exceeds 100 percent. not because of high contributions, but because of a long period of service.
Second – the use of available saving methods for the future. First of all, PPK, which, even now, when the financial markets are depressing, offers a rate of return on each zloty paid by an employee at the level of almost 100%, thanks to subsidies received from the employer and the state. – It is worth adding individual ways of saving – IKE or IKZEbut also less formal ways of accumulating capital for retirement, such as real estate. Of course, this is not a solution for everyone, but it is also a way to secure funds in the future – summarizes the expert.