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POLAND: Planned pension increase

The government is considering a change to its planned policy Senior 500+ – based on the successful Family 500+ programme, the ruling party initially saw a PLN 500 annual pension add-on. Instead, the government is planning to introduce a new adjustment mechanism. Currently, benefits are increased by a formula that consists of the inflation figure from the previous year and 20% of the real wage growth rate. This means that this year the hike would reach 3,26%. The new formula, however, assumes that everyone will receive an adjustment only by the inflation rate (currently 2,6%), but no less than PLN 70. For those with minimum pensions this would mean a PLN 36 increase when compared to the current formula.

Recently, the PiS party began targeting a more senior electorate with dedicated social policies. During the recent PiS Convention, PM Morawiecki announced a number of initiatives, such as the refurbishment and construction of high standard retirement homes. Retirement pensions in Poland considered low and insufficient, but commentators argue that the announcement of a pension subsidy is merely a campaign stunt to rally support for the party ahead of the local elections. Economists agree that the Polish economy has reached its peak growth rate, which will now likely fall. An expensive social policy would mean that public finances would be pushed to the limit and tax rates increased. For the state budget, changes to the pension adjustment formula will be significantly cheaper than the previous government plan, which assumed the PLN 500 add-on, as well as the annual pension adjustment. However, politically a PLN 500 add-on would carry greater weight, especially during the ongoing election season.