New pension system will be expensive for taxpayers

29-02-2008, 11:48

Warsaw (Puls Biznesu) -  The system of  pension funds is very advantageous. Unfortunately, only to pension funds, and not tax payers.

Surprise no. one: two weeks ago the ministry of labor presented a new system of pensions. It was different from the bill evaluated by experts, organizations of employers and trade unions late last year. Surprise no. two: there will be no pension for couples – a solution promised by Citizens’ Party (PO) and Peasants’ Party (PSL) in the election campaign. Surprise no. three: the new bill cares more for the business of pension funds than of the state budget. After a pensioner dies, his capital collected in the pension fund will stay there. The state, i.e. taxpayers, will take care that the late pensioner’s spouse has enough money to survive.

“The family payment from the social insurance fund (FUS) means that the pension fund has lower risk as the state takes the risk. The capital gathered at a pension fund stays there while widows and widowers are supported by the state”, Agnieszka Durlik-Khouri, expert of the National Economic Chamber (KIG) commented.

The previous government resisted to the lobbying from the insurance industry and prepared a bill offering a choice to the clients of insurance companies. A retired person could choose if he wanted higher pension (individual pension) or if he wanted to secure his family members after his death (guaranteed period pension, pension for couples), which meant lower pension.

“The idea provided that part of the responsibility for the pension system goes to the society. Citizens choose what suits them best but they also bear the consequences of their choice”, Pawel Wypych, former CEO of ZUS social insurance company and the head of the team which prepared the previous bill, said.

The new bill, prepared by deputy minister of labor Agnieszka Chlon-Dominczak, offers no choice. There will be only individual pension. After the death of the client, the pension fund takes over his capital. The remaining family members left with low income, will get family payments.

“Family payments are financed from the social insurance fund FUS financed from premiums paid by all the insured people”, Agnieszka Chlon-Dominczak said.

The problem is that the premiums cover FUS’s spending only partly.

“FUS has a deficit and is subsidized by the state, which means that all taxpayers will pay to secure widows and widowers”, Pawel Wypych believed.

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