The formation of the new Polish government is still ongoing, and it may take until December. But the opposition parties likely to form the governing coalition are already facing scrutiny regarding their election pledges. For many Poles, one of the hottest topics is pensions.
The Law and Justice (PiS) party, which lowered the retirement age to 60 for women and 65 for men in 2017, and increased the state spending for pensioners over the last eight years by more than 1,000 percent, as calculated by Business Insider.
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The centre-right Civic Platform party of Donald Tusk lost the 2015 elections, among other reasons, because of previously raising of the retirement age in 2012 (Photo: European Union)
But in its latest recommendations for Poland, the European Commission warned that “recent changes in the general pension system and the costly special pension regimes have made pension pay-outs more generous to current pensioners”.
“This has reduced incentives to work longer than the relatively low retirement age, and has increased ageing-related spending pressures,” the EU executive also said.
Reducing the retirement age and offering financial incentives to pensioners boosted the PiS’s voter support to 54 percent among those aged over 60 this year — building on the support they received during the previous elections in 2019.
“These extra allowances were needed. It was a neglected group, [and] social justice demanded it. This was not electorally motivated and if it did have electoral consequences, well everything does. We didn’t expect soldiers to vote for us only because we invested in further development of the Polish army during the last years,” PiS MEP Karol Karski, told EUobserver.
For her part, liberal Renew Europe (Polska2050) MEP Róża Thun said that the “PiS was all about buying the votes of pensioners, we want to do it differently to secure them a dignified retirement”.
For the Polish opposition, which is likely to form a new government, the pension system will be a great challenge.
“Everyone is aware that the retirement age is too low, but it will be impossible to raise it, at least in this term of office,” said Oskar Sobolewski, a pensions expert.
The centre-right Civic Platform party lost the 2015 elections, among other reasons, because of raising the retirement age back in 2012.
The reform, which raised the retirement age to 67 for both men and women, was “badly implemented and, above all, badly communicated,” Sobolewski said.
Although the rise of retirement age in Poland is possibly needed, the leader of Civic Platform and most probably the next Polish prime minister, former EU Council chief, Donald Tusk “will not make the same mistake again,” Sobolewski added.
“Someone has to do it eventually, but this time it has to be properly planned and implemented, starting with a public debate to convince people why raising the retirement age is necessary. Then you can first equalise the extremely low retirement age for women with that for men,” Sobolewski explained.
Such steps are also encouraged in the European semester recommendations from the European Commission, which points out the problem of a “rapidly-ageing population” in Poland, which together with increasing life expectancy may lead to “a strong drop in future pension benefits in relation to the final salary”.
This would mean that a large proportion of pensioners would be at risk of poverty. EU commission analysis shows that merely to maintain the level of benefits close to the current level, Poland would need to spend an additional 6.7 percent of its GDP by 2070.
Currently, according to Allianz Research, around 8.6 percent of Polish GDP is spent on pensions.
Those EU commission projections are shared by those of the Polish ministry of finance (2022) according to which there will be a steady increase in the number of people of post-working age (men aged 65+ and women aged 60+), from 9.2 million in 2030 to 11.9 in 2050, and then a decline to 10.9 million in 2080.
The working age population (men aged 18-64 and women aged 18-59) will also decline, with the greatest impact on the labour market. From 21.4 million in 2030, through 16.9 million in 2050 to 13.1 million in 2080
The PiS government was more than aware of the pension system’s impending collapse, but preferred to still “play a double game,” says Sobolewski. “In their discussions with the commission, they were agreeing that it’s a problem that needs to be solved, but at home, they were never admitting it,” the Polish pension expert said.
Indeed the obligation to raise the retirement age is one of the conditions set up for Poland in the EU Recovery Plan.
According to outgoing PM Mateusz Morawiecki’s plan, it would be done and achieved by simply encouraging people to work longer with tax exemptions and other benefits for those who do not retire despite reaching the right age.
Extra pension allowances
The problem is that the extra pension allowances and benefits introduced by PiS for pensioners seem to be much more attractive than vague promises of new incentives for those who will postpone their pensions.
The PiS gained its second term in office in 2019 after having introduced (the same year) the so-called “13th pension”. Moreover, ahead of the next elections and also to address high inflation and other financial challenges of Polish seniors in 2021 “the fourteenth” pension was also introduced and this electoral year the allowance was increased by one-third, from approximately €350 to €580.
At the end of July this year, the Polish parliament — with the PiS majority — passed legislation making the 14th pension a regular benefit and changing its sources from the external solidarity fund (covered by employers contributions) to the main budget.
This means that from next year the extra allowance will cost the Polish budget €25bn, in addition to €67bn which is the cost of regular pension payments in Poland.
Will the new government keep the 13th and 14th pensions? This was one of the first questions asked of opposition parties after the elections.
“What has been given, will not be taken away, this was our line for the elections and it will stay. But we won’t siphon off money but set up the right systems. We have to work out a way out of this situation that is acceptable and does not ruin the budget,” MEP Thun told EUobserver.
All the coalition parties that will most likely form the new government agree to keep the 13th pension, but there are various ideas for the 14th allowance, including replacing it with a second annual indexation.
“We certainly won’t help with that,” PiS MEP Karski said, arguing that his party will never back up any decision by the new government that will strip the Polish pensioners of current benefits, or raise the retirement age.
“Nothing will change as long as the extra pension allowances will not be removed, they are too costly and detrimental to the pension system, they discourage people from work,” said pension expert Antoni Kolek.
Polish politicians may be conjuring with reality, but pension-system reform is only a matter of time.
