Poland restructures its pension system
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Poland restructures its pension system

Advised by the World Bank, Poland is reforming its pension system. If successful, the new pension structure could become a model for Western Europe. Isabel Vallejo reports

EXCLUSIVE

Poland's strong economic fundamentals have allowed it to withstand the crisis in emerging markets and by September emerging markets investors were overweighing Poland in their portfolios. The crisis allowed Poland to differentiate itself from its neighbours.

As part of its transformation into a strong independent economy, Poland is restructuring its pension system. The country is switching from defined benefit to defined contribution pension schemes. The Social Security Office (known as ZUS by its Polish acronym) is being completely restructured. It has taken at least two years for the Polish government, in close collaboration with the World Bank, to determine the most appropriate system and how to implement it. The aim of the new system is to give the individual more freedom and choice, while providing a basic minimum income for retirement. At the macro level it will provide the Polish capital markets with a stronger and larger local investor base.

Today contributions to the Polish pay-as-you-go system account for almost half of an employee's salary, and are regarded as a labour tax rather than an investment for the future. Evasion is high and informal employment very attractive. ZUS operates as a transfer agent, taking money from today's workers to pay today's pensioners.

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