The minimum pension as an instrument of poverty protection in the defined contribution pension system – an example of Poland
AbstractPension systemsâ reforms are often related to a shift towards (fully or partially) defined contribution systems, in which the pension distribution reflects to a larger extent the wage distribution. Additionally, relatively shorter working lives of those that have lower earnings, increase the risk of receiving lower benefits. The aim of the paper is to present the changing role of minimum pension as a tool of redistribution in Poland after the pension reform. The new mandatory pension system covers workers born after 1948 and is based on two components â notional and funded defined contribution (NDC and FDC). It replaced the old defined-benefit PAYG system, which had a significant redistribution through the pension formula. The formula itself served as a tool of low income protection, that was additionally strengthened by the minimum pension guarantee. The new system aims at actuarial fairness, which means that the only mechanism of redistribution is the minimum pension, financed from general taxes. As a result of this change, grater income inequalities of pensioners following those of people in working age are expected. This means a change of the role of the minimum pension from one of the tools supporting redistributive policy to the main tool of social policy preventing poverty among elderly persons. The minimum pension is expected to fall compared to average wage. The decision on its level and evolution becomes one of the most important policy questions. It will have crucial importance in preventing poverty in the old-age. Simulations are used to present the impact of changes in the pension distribution on the number of pensioners covered by minimum pension.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 12 (2013)
Issue (Month): 03 (July)
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Other versions of this item:
- Chlon-Dominczak, Agnieszka & Strzelecki, Paweł, 2010. "The minimum pension as an instrument of poverty protection in the defined contribution pension system – an example of Poland," MPRA Paper 25262, University Library of Munich, Germany.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
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- Angelo Marano & Carlo Mazzaferro & Marcello Morciano, 2012.
"The strengths and failures of incentive mechanisms in notional defined contribution pension systems,"
Giornale degli Economisti,
GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 71(1), pages 33-70, October.
- A. Marano & C. Mazzaferro & M. Morciano, 2011. "The strengths and failures of incentive mechanisms in notional defined contribution pension systems," Working Papers wp799, Dipartimento Scienze Economiche, Universita' di Bologna.
- Goedemé, T., 2012. "GINI DP 27: Recent Trends in Minimum Income Protection for Europe's Elderly," GINI Discussion Papers 27, AIAS, Amsterdam Institute for Advanced Labour Studies.
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