Welfare State Classification: The Development of Central Eastern European Welfare
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| 5.2 Pension system As described in the preceding paragraph, reforms of the pension system took a lot of effort. The most important reform of the Polish pension system took place in 1999. This new pension system, called Security through Diversity includes a three-pillar system, which is common in most of Western- Europe. Cerami (2005) argues that one can distinguish three types of social policy. This is mainly caused by the fact that social insurance is differentiated according to various groups of workers. ZUS is an institution which is responsible for the collection and administration of the contributions of the employees, while KRUS is an organization which is responsible for the insurance of farmers. At the same time, one can observe different categories of workers to which special provisions apply, such as member of the police (Cerami 2005: 81). As described in the introduction, major and permanent reforms in social policy did not take place in the years following the collapse of the Berlin Wall. However, Poland did introduce legislation which increased the value of pensions in order to coop with high inflation. The so called revolutionary Act intended to create a stable mechanism for the calculation and indexation of pensions. This was in contrast with other transition countries (Bialas et al. 2001: 7). At the end of 1994, the government decided to change the indexation of pensions to price-based. The change was legislated, after a period of public discussion, in 1996 and implemented in 1997. The final solution implied that the pensions were to be increased ex-ante, so that the average real value of pension in a given year would not be lower than the year before (Bialas et al 2001: 9). Poland’s welfare state was characterized by a relatively low demographic dependency and a relatively high system dependency ratio. This resulted in high pension expenditures, which were financed by rising contribution rates and increasing state subsidies to social insurance. (Bialas et al. 2001: 10). This situation would create pressure on the PAYG-pension system, especially when the baby-boom generation would reach the retirement age. Thus, the pension system in Poland needed to radically reformed, mainly due to fundability and feasibility issues. The Security through Diversity system was introduced on January 1, 1999. The new old-age pension system replaced the previous monopoly of a traditional European pay-as-you-go scheme, whereby all pensions were paid out of current tax revenues. The new system consists of a three pillar system in which the sources of the future pensions financing are diversified (Gora & Rutkowski 2000: 3). The first and the second pillar are mandatory and pillars with benefits linked to the contributions made. The first pillar is financed through a PAYG system, but at the same time a small part of this pillar is funded through the Demographic Reserve Fund. The second pillar is a fully funded pillar. The third pillar is voluntary which means that the system is subject to individual preference (Gora & Rutkowski 2000). The new pension scheme was introduced gradually. One of the important features of the system is the separation from other social insurance. Hence, one only contributes to the pension system, which means that there is no social contribution anymore. Instead one can find separate contributions financing each of social security elements (Gora & Rutkowski 2000: 4). The Polish pension scheme is work-related, and can be defined as Bismarkian. According to Cerami 2005) this can not be seen a new introduction; in pre-soviet times this system was already present. The radical and permanent reform of the pension system and the small and temporary reforms preceding were mainly caused by feasibility and fundability issues as well economic and social circumstances. Much political and public debate resulted in procrastination of radical reforms. Though, the shift towards a Bismarckian, work-related pension system can well be observed. Download 374.54 Kb. Share with your friends:
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