IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2000-286.html
   My bibliography  Save this paper

The Quest for Pension Reform: Poland's Security though Diversity

Author

Listed:
  • Marek Gora
  • Michael Rutkowski

Abstract

All over the world, pension systems have financing difficulties that need to be addressed. There are three ways of dealing with pension systems problems, namely subsidisation, rationalisation and reforming. Opposite to the first two, the latter one means a deep change of system fundamentals. The new system is a way of income allocation over life cycle. The system is entirely based on individual accounts. Individuals have two accounts each. At the day of retirement amounts accumulated in each of the accounts are annualised. Pensions depend on two factors: (a) accumulated capital, and (b) age of retirement. Such old-age pension system provides its participants with high security thanks to diversification of risk between two markets, namely the labour market and the capital market, and full link between contributions and benefits. Minimum guarantee is financed by the state budget. The new system is less exposed to typical problems of that markets. Additionally, it is more resistant to political pressures. Additionally, the new system is expected to create the following externalities: change of savings structure in favour of long term savings, less incentive for early retirement, and less incentive for hiding income. The old Polish old-age system was terminated on 31 December 1998 - a new one called "Security through Diversity" was introduced on 1 January 1999. The new system covers people up to 50. The most important feature of the new system is its separation within social security. In particular, a separate contribution is paid for old-age. One part (5/8) of that contribution goes to a notional defined contribution 1st pillar individual account, the other part (3/8) goes to fully funded 2nd pillar individual account. Both elements of the system work along defined contribution regime. People between 30 and 50 have an option to pay entire contribution to 1st pillar individual account, people below 30 have their old age contributions automatically divided between the accounts.

Suggested Citation

  • Marek Gora & Michael Rutkowski, 2000. "The Quest for Pension Reform: Poland's Security though Diversity," William Davidson Institute Working Papers Series 286, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2000-286
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39670/3/wp286.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection Discussion Papers and Notes 20048, The World Bank.
    2. Whitehouse, Edward, 1999. "The tax treatment of funded pensions," MPRA Paper 14173, University Library of Munich, Germany.
    3. Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
    4. James, Estelle, 1998. "New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions," The World Bank Research Observer, World Bank, vol. 13(2), pages 271-301, August.
    5. Holzmann, Robert, 1997. "On economic benefits and fiscal requirements of moving from unfunded to funded pensions," Financiamiento para el Desarrollo 5250, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Holzmann, Robert, 1998. "Financing the transition to multipillar," Social Protection Discussion Papers and Notes 20052, The World Bank.
    7. Annika Sundén, 1998. "The Swedish NDC Pension Reform," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 69(4), pages 571-583, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barr, Nicholas, 2002. "Reforming pensions: myths, truths, and policy choices," LSE Research Online Documents on Economics 286, London School of Economics and Political Science, LSE Library.
    2. Disney, Richard & Whitehouse, Edward, 1999. "Pension plans and retirement incentives," Social Protection Discussion Papers and Notes 20851, The World Bank.
    3. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications - Books, The World Bank Group, number 7336.
    4. Marek Góra, 2003. "Reintroducing Intergenerational Equilibrium: Key Concepts behind the New Polish Pension System," William Davidson Institute Working Papers Series 2003-574, William Davidson Institute at the University of Michigan.
    5. Krzysztof Kompa & Dorota Witkowska, 2014. "Pension Funds in Poland: Efficiency Analysis for Years 1999-2013," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 14, pages 105-124.
    6. Whitehouse, Edward, 1999. "The tax treatment of funded pensions," Social Protection Discussion Papers and Notes 20126, The World Bank.
    7. Richard Disney & Robert Palacios & Edward Whitehouse, 1999. "Individual choice of pension arrangement as a pension reform strategy," IFS Working Papers W99/18, Institute for Fiscal Studies.
    8. Grimmeisen, Simone, 2004. "Path dependence and path departure: Analysing the first decade of post-communist pension policy in Hungary, Poland and the Czech Republic," Working papers of the ZeS 01/2004, University of Bremen, Centre for Social Policy Research (ZeS).
    9. Börsch-Supan, Axel, 2003. "What are NDC Pension Systems? What Do They Bring to Reform Strategies?," MEA discussion paper series 03042, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    10. Palmer, Edward, 2001. "The New Swedish Pension System," Discussion Paper 36, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    11. Velculescu, Delia, 2011. "Private Pension Systems in Emerging Europe: The Uncertain Road Ahead," MPRA Paper 88969, University Library of Munich, Germany, revised 2011.
    12. Góra, Marek, 2003. "The New Polish Pension System: An Example of a Non-orthodox Approach to Pension Reform," Discussion Paper 168, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Holzmann, Robert & Jousten, Alain, 2010. "Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing," IZA Discussion Papers 5296, Institute of Labor Economics (IZA).
    2. Palacios, Robert & Whitehouse, Edward, 1998. "The Role of Choice in the Transition to a Funded Pension System," MPRA Paper 14176, University Library of Munich, Germany.
    3. David Robalino, 2005. "Pensions in the Middle East and North Africa: Time for Change," World Bank Publications - Books, The World Bank Group, number 7427.
    4. Michele Boldrin & Juan J. Dolado & Juan F. Jimeno & Franco Peracchi, "undated". "The future of pension systems in Europe. A reappraisal," Working Papers 99-08, FEDEA.
    5. Disney, Richard & Whitehouse, Edward, 1999. "Pension plans and retirement incentives," Social Protection Discussion Papers and Notes 20851, The World Bank.
    6. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
    7. Fernando Perera-Tallo, 2012. "Optimal Retirement Age and Aging Population," 2012 Meeting Papers 728, Society for Economic Dynamics.
    8. Uthoff, Andras, 2006. "Gaps in the welfare State and reforms to pension systems in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    9. Ling-Ni Boon & Marie Brière & Carole Gresse & Bas J. M. Werker, 2013. "Regulatory Environment and Pension Investment Performance," Post-Print hal-01492619, HAL.
    10. Georg Hirte, 2003. "The Political Feasibility of Privatizing Old‐Age Insurance," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 507-525, September.
    11. Eduardo Fajnzylber & David Robalino, 2010. "Assessing Fiscal Costs and the Distribution of Pensions in Transitions to FDC and NDC Systems: A Retrospective Analysis for Chile," Working Papers wp_005, Adolfo Ibáñez University, School of Government.
    12. World Bank, 2000. "Nicaragua : Pension Reform Proposal," World Bank Publications - Reports 14972, The World Bank Group.
    13. K. Mc Morrow & W. Röger, 2002. "EU pension reform - An overview of the debate and an empirical assessment of the main policy reform options," European Economy - Economic Papers 2008 - 2015 162, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. James, Estelle, 1998. "New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions," The World Bank Research Observer, World Bank, vol. 13(2), pages 271-301, August.
    15. repec:dau:papers:123456789/13629 is not listed on IDEAS
    16. Titelman Kardonsky, Daniel & Uthoff, Andras, 2003. "The role of insurance in social protection," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    17. Volker Meinhardt & Katja Rietzler & Rudolf Zwiener, 2009. "Konjunktur und Rentenversicherung - gegenseitige Abhängigkeiten und mögliche Veränderungen durch diskretionäre Maßnahmen," IMK Studies 03-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    18. Christine Lagoutte & Anne Reimat, 2013. "Public or Private Orientation of Pension Systems in the Light of the Recent Financial Crisis," Review of Social Economy, Taylor & Francis Journals, vol. 71(3), pages 306-338, September.
    19. Armstrong, Angus & Davis, Philip & Ebell, Monique, 2015. "An economic analysis of pension tax proposals," LSE Research Online Documents on Economics 86276, London School of Economics and Political Science, LSE Library.
    20. Alvaro Forteza, 1998. "Los efectos de la Reforma uruguaya de la Seguridad Social en el ahorro," Documentos de Trabajo (working papers) 1098, Department of Economics - dECON.
    21. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection Discussion Papers and Notes 20048, The World Bank.

    More about this item

    Keywords

    old-age pensions; individual accounts; defined contribution; income allocation;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2000-286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WDI (email available below). General contact details of provider: https://edirc.repec.org/data/wdumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.