Raising the retirement age. No politician will sign it, although everyone knows

Having learned from the experience of the Civic Platform a few years ago, politicians will not submit a proposal to raise the retirement age on their own. The proposal is met with such strong opposition that it is downright political suicide. Despite everything, this discussion is ongoing, and was provoked by the Minister of Funds, Katarzyna Pełczyńska-Nałęcz, who admitted in the Onet Rano program that she does not rule out raising the retirement age. “But today the most important thing is, and it will certainly work, if there is an economic incentive for seniors, that it will pay off for them to work longer,” she said.

Raise the retirement age, but not by law

The Minister thus made it clear that the increase in retirement age could not be achieved in any other way than through a change in the law. There is nothing to prevent it from being achieved by fait accompli: when women over 60 and men over 65 come to the conclusion that working longer – even part-time – is worthwhile, many of them will decide to extend their professional activity. Especially since we are living longer and are in better shape than our parents’ generation.

Her colleague from Poland 2050 spoke in a similar tone. In Thursday’s “Gość Wydarzeń”, Ryszard Petru said that he was also an advocate of encouraging longer work hours.

– I am in favor of the proposal that for each year of work one gets a higher pension – he said.

He also clearly declared that during the term of office of the coalition government of KO, Trzecia Droga and the Left, the statutory age will not be increased.

– I am against increasing the retirement age formally through changes to the statutory age. I am for paying people extra to work longer – he ruled. – There is no way in this term that the retirement age will be increased – added the MP.

The replacement rate is getting lower

“If we do nothing, the replacement rate, i.e. the amount of the pension compared to the last salary, will fall more than twice in the next 20-30 years – from over 50 to about 25 percent,” wrote Pałczyńska-Nałęcz on Platform X. The replacement rate is the ratio of the average amount of the pension received to the average salary received during the period of professional activity. Some people wrongly say that it is the ratio of the last salary to the pension, but this is not true: the overall average salary is important.

Economists have long been saying that raising the retirement age is a necessity and at some point some government will have to decide on this unpopular step. – The closer to the end of work, the faster the collected contribution grows. This is how the power of compound interest works. On the other hand, we divide the collected capital by the forecasted duration of life in retirement. The later we retire, the shorter this period. We divide more capital by fewer years, so the pension is higher – explained Prof. Agnieszka Chłoń-Domińczak from the Warsaw School of Economics in an interview with “Rzeczpospolita”.

What does the amount of your pension depend on?

The height depends on several factors:

• the amount of indexed contributions on the insured person’s account,

• revalued initial capital,

• funds saved in the sub-account,

• average life expectancy.

It should be remembered that the right to a pension is granted to people who have reached retirement age and have any pension insurance period recorded in their ZUS account. Therefore, the length of service does not affect the right to a pension, but only its amount. The longer the length of service, the higher the benefit may be. The amount of the pension is also influenced by individual choices made during professional life, e.g. regarding contributions to the third pension pillar or the moment of retirement.

Every year worked after reaching retirement age can increase your pension. According to the former president of ZUS, Prof. Gertruda Uścińska, “postponing the decision to retire for a year can increase your future benefit by as much as 10-15 percent, and waiting seven years can even double your benefit.”

Another solution is worth considering: drawing a pension and working additionally at the same time. This is a legal and very profitable solution.

What kind of retirement for today’s 40-year-olds?

In February 2023, the host of the “Newsroom” program on Wirtualna Polska asked his guest, Dr. Tomasz Lasocki from the Faculty of Law and Administration of the University of Warsaw, what kind of retirement he, as an average 40-year-old, can count on. The answers can unsettle even the most optimistic person about the future.

Dr. Lasocki began by saying that in the case of a 40-year-old, “half the cards are already dealt.” Much of the final reckoning depends on how the “market treated” him in the first years of his professional activity.

– If you worked as a student, and I assume you did, you have 5 years of non-contributory work that counts only towards getting the minimum pension. If your father finished university, he increased his pension by 3.5%. The rules of the game have changed completely. In the old system, it was enough to show 10 years of good work to establish the amount of the pension. In the new system, not a single contribution is forgiven – he said. – We haven’t learned this in 25 years and it hasn’t reached our consciousness.

He added that old age is divided into stages. – The first 10 years, i.e. up to seventy for women, is the most pleasant time, when we still have strength, so we earn extra money. We can take advantage of various programs: PPK, IKE, IKZE. Only the funds accumulated there, this is rarely mentioned, are not subject to indexation. People who received money from PPK 5 years ago probably do not have these funds anymore, because inflation has eaten them up. This is how we lose purchasing power. After 10 years of retirement, all we have left are the money from ZUS – explained Dr. Lasocki.

How many seniors do not even have a minimum pension?

The minimum pension is currently PLN 1,780.96 gross. At the end of 2022, the number of pensioners who do not receive even this amount per month was 365.3 thousand people. The largest percentage of this group are women (over 290 thousand).

The number of seniors who cannot count on even a minimum pension is growing year by year. Between March and December last year, it increased by almost 25,000 – from 341.3 thousand to 365.3 thousand. At the end of 2020, 310.1 thousand people received a pension lower than the minimum (at that time it was PLN 1,200), while at the end of 2019, it was 261 thousand seniors, which means that there was an increase of almost 50 thousand over the year.

The lowest pension currently paid by ZUS is 1 grosz. It is received by a woman who has paid a contribution for one day of work on a contract for services.

– Very low pensions are the result of the introduction of new rules for acquiring the right to benefits. Currently, it is enough to reach retirement age (60 years for women and 65 years for men) and make at least one contribution payment. In such a case, the pension is not high, but it is – explained Dr. Tomasz Lasocki from the University of Warsaw, quoted by Radio Zet.

The highest pensions come from very long work

On the other hand, there are retirees who receive record-high benefits. The highest pension in Poland is paid to a retiree from Silesia. After the last indexation, the benefit is PLN 48,673.53. The recipe for a high pension? Long years of work. The man began receiving the benefit 20 years after reaching retirement age. He worked for 62 years and 5 months. During that time, he never once took sick leave.

On the women’s side, the record holder is a woman from Kuyavian-Pomeranian Voivodeship. She worked for a slightly shorter period, for 61 years, and decided to end her professional career at the age of 81.