Is it worth giving up PPC? “From a human point of view, absolutely not”

Witold Zemek, Wprost.pl: 78 percent. The Poles withdrew from the PPK, is there any up-to-date data?

Anthony Kolek, President of the Pension Institute: Yes. The PFR uses a slightly different methodology that increases this level of participation. But if we look at such data in the most objective way, i.e. that there are about 2.5 million people in the PPC, and is comparable to the level of 11.5 million people, i.e. everyone who is eligible, we actually get this participation at around 20%, which means more than 70% are not using this program.

This is a very bad result. Where did it come from?

There are many reasons. First, of course, to be in PPK, you have to give away your money, but in reality you bring home less. And of course, in terms of large cities and people who make good money, those 2 percent. salary is not high. On the other hand, in smaller towns and where people earn the least, that 2 percent. impressive and annoying.

The second, of course, is trust in the system, because everyone who is faced with the decision to be in the PPC or not remembers the OFE and housing books and wonders if the PPC will share their fate and whether this money will be left by some in the appropriate way.

Of course, everything is possible, but from the point of view of today’s law, the funds in the PPC are private, so they should not be taken away in any case. The probability is low, but there is such a possibility, so again people are not convinced of the CPD.

Thirdly, it is not necessary to deceive, it is also an additional cost for employers. Of course, employers can’t convince people to leave the PEP, but it’s likely that in many places many people didn’t join the program because the employer wasn’t particularly interested in getting more involved.

In addition, there is an exemption from the CPD for small entrepreneurs, because if we look at the structure of those people who are in the program, it turns out that most people work in large companies. Large companies, including corporations, are very often institutions where incomes are relatively better, where 2 percent. employee wages and 1.5 percent. doesn’t hurt anyone.

You are talking about distrust of the system. This is an emotional argument. Are there rational reasons for abandoning PEP?

From an individual point of view, absolutely not. Everyone who has the opportunity should save. Regardless of whether to retire or to withdraw these funds, let’s remember that money can be withdrawn from the PPC. These are good decisions.

But there is also a group of employees who believe this money could be better invested because financial institutions using Employee Capital Plans are required to invest primarily in companies listed on the Warsaw Stock Exchange from the WIG20 index.

The institutions that manage the CPP have also bought bonds from, for example, FIUs, which are currently very poorly valued. This investment policy is not ideal, but it is dictated by law and cannot be changed. For some employees, this may not be the best form of income.

78 percent of employees will now take 2 percent. your salary and go invest? Somehow I don’t see it.

Absolutely not. And here you can see how meager the information policy of the government was in this matter. Please note that in the same year that the CPP was introduced, the personal income tax rate was also reduced from 18 to 17 percent. The non-taxable amount has been reduced, the tax threshold has been raised. These messages are not related in any way.

And we can say that we will allocate 2 percent. salary at the PPC, but at the same time we will reduce taxes, so no one will have less salary, because everything will even out.

Is it possible to save the PPK at all? Because at the moment, with participation at the level of 20 percent, the system practically does not work.

PPC has become a luxury item for wealthy people. And the system was created precisely in order to create an additional source of income for people who will have the lowest pensions in the future, i.e. for those who earn the least.

Today we hear that someone managed to save PLN 600,000 in PPK. zloty. This is a complete perversion of this system. Public money is spent on subsidizing the richest, instead of solving the real problem that has arisen here and now. This product has its drawbacks and bugs, but at the moment there is no better one, it is difficult to find an alternative.

It will be difficult to convince people to use the PPK, because many Poles see changes in the pension system so often that they do not keep up with them. They do not know whether there is an open pension fund or not, what happens to this money, whether it is lost or already lost.

There are too many changes, and they do not affect the quality of the pension system. On the contrary, they make it difficult to understand.

Then wouldn’t this emotional argument of disbelief become rational in an instant? After all, the PPC can be replaced by some other concept at any time.

The history of the last twenty years, when pension products were in effect, shows that almost every political option for coming to power had its own concept. Some have introduced open pension funds, others have cut them down a bit, others have introduced the CPP, and others will probably also introduce their own solution, which, in their opinion, will be better for the pension system.

This is problem. Surely, if we had a stable system based on clear rules, there would be no doubt about how this system works and how I can reasonably behave with this system. And yes, every citizen is looking for his own rationality. And one that does not involve making risky decisions. It’s not good for trust.

Let’s imagine that there are no changes, the PPC still has 20% of employees. employees, and today’s 30-35-year-olds are retiring. What is the current projected replacement rate?

For people in their 30s and 40s today who will retire in 2050, the projected replacement rate is around 25 percent. Last paycheck. Let’s say the average salary is 6000 PLN. ¼ is 1500r.

We have a minimum pension in the system, that is, a minimum allowance for women after 20 years of work and for men after 25 years of work. It is estimated that 60-70 per cent. today’s employees will receive such a benefit. So we will work for this minimum for our entire professional career.

It’s a huge problem how to make these people know that this is going to be a very low benefit and that they have to save extra in order to create this second and third source of income for themselves in the future.

How many people generate such a source, saving, for example, in IKE or IKZE?

Less than half a million.

This is even less than in the PPC.

We also have what is called PPE, which is employee retirement plans. About half a million people participate in these programs. They are based on the fact that investments are financed only by employers.

Large Western corporations such as Volkswagen, HO or Apple have such solutions. Orlen and KGHM also have them. And there participation is much higher. KGHM once boasted that 90 percent of its employees are PPE.

But there are large companies that can afford it.

Yes. But keep in mind that PPE is an alternative to PPK for the employer. A company with pension plans is not required to implement employee investment plans. And these large Western companies would rather take on all the costs than trust the system created by this government.

This shows quite clearly what the perception of the PPC is.

We have slipped back into big companies and I would like to go back to those who will retire in 2050. Many members of this generation have worked for most of their professional lives under civil law contracts for which no contributions were paid. They won’t even get that minimal benefit. Maybe then, instead of minor changes and new products, a revolution in the system should occur?

This revolution is already happening. The introduction of the 13th and 14th pensions means that the defined contribution system is bankrupt and cannot continue in its current form.

In 1999, we agreed on a system whereby as much as you save, you get back later. Meanwhile, as early as 2019, the government was forced to provide special benefits because pensions were too low. This means that the system we just exited is being introduced through the back door.

And since such additions are introduced, it is difficult to persuade people to save money, because now some politician will come and raise the stakes. The President has already spoken about the 15th resignation. If previous generations were able to increase benefits in this way, then why abandon current consumption? It will be somehow.

And I think that “somehow it will happen” is a good result of the seven-year period of the current government in the field of the pension system.

Somehow it will be so, I cannot imagine a situation in which a large part of society is not entitled to a minimum pension.

It will certainly hurt, but this lack of permissions is necessarily compensated by the corresponding add-ons. Today we already have, for example, allowances for firefighters, for village leaders.

Will we have allowances for catering workers, the film industry or journalists in 2050?

This is very likely. And this will be explained by the fact that this is a socially responsible profession, and the contracts were free of charge.

Is there a way to cure this system?

First, raising the retirement age. What we have now does not correspond at all to how long we live. Secondly, it is necessary to depoliticize the retirement age. There can’t be a situation where a politician says at a conference that will lower it even more.

In the Netherlands, for example, the retirement age depends on life expectancy. Once a year, the chairman of the local equivalent of the Central Statistical Office reports that the retirement age is, for example, 67 years and one quarter, because that’s what the data shows. And no one argues with this.

Thirdly, a return to what we already had, i.e. to a system based on sustainable three pillars. The first is ZUS, the second is PPC and PPE, the third is individual savings. And even if the ZUS pension is minimal, the rest of the sources, taken together, will give us a specific amount.

But ACC should be general in such a situation. Everyone who enters the labor market must be in the system without the possibility of exit.

So forced AUC is a recipe for not starving yourself in old age?

Roughly speaking, yes. Otherwise, everything will accumulate around ZUS, which will be in a difficult situation. In other words, we will fund very low payouts for huge amounts of money.