Let me tell you a story about the pension system in Poland. Retirement is known here as the „system emerytalny„. You know, retirement is a periodic benefit given to those hardworking folks who have worked professionally and contributed to social insurance for a considerable length of time. This pension money comes from something called the Social Insurance Fund. By law, it is granted based on the insured risk, defined as reaching a specific retirement age.
Retirement Age in Poland
In Poland, I know the retirement age is 60 for women and 65 for men. Now, if you want to be eligible for these benefits, you have to pay your dues. I mean, you need to make contributions towards social or retirement and disability insurance.
Let me say, if someone doesn’t have the required work experience—20 years for women, and 25 for men—sadly, the Social Insurance Institution (ZUS) will not pay them the minimum pension. They will only receive an amount based on the contributions accumulated in their pension account. The conditions for obtaining the lowest pensions are defined by the pension and disability insurance act.
The Great Pension Reform
Lets get back to 1999, there was a pension reform in our country, Poland. This reform made sure everyone insured in the ZUS got separate pension accounts where their contributions were recorded. This is the so-called first pillar of the pension system. But, there’s more:
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- The second pillar – open pension funds (OFE),
- The third pillar – voluntary, which includes individual retirement accounts (IKE), individual retirement security accounts (IKZE), and employee capital plans (PPK).
In this first pillar system, contributions paid to the ZUS—by employers for employees and by entrepreneurs for themselves—create a budget for the current payment of benefits to eligible pensioners and pension beneficiaries.
Now, it is worth to say, this money is neither inherited nor invested. They’re only subjected to valuation once a year, considering potential wage increases and inflation.
The Universal Retirement Age in Poland – What Is It?
So, you’re probably wondering, „What is the universal retirement age in Poland?” To answer that, we need to look at two key factors:
- Reaching the universal retirement age,
- Paying contributions for at least one day towards social insurance or retirement and disability insurance as an employee or as a person running a business.
Allow me to explain further. If you were born after December 31, 1948, and you’ve paid your dues, you can get your pension from ZUS at 60 years old if you’re a woman, or 65 if you’re a man.
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And that’s provided you’re not already drawing a pension due to reaching an elevated retirement age. Now, it is worth saying that receiving a pension is a right, not a duty. It’s granted at the request of the insured person, and you don’t have to apply to the ZUS on the day you reach the universal retirement age.
You can wait and continue working, which allows you to accumulate higher amounts in your pension account, resulting in a larger future benefit.
The Path to a New Pension
I can tell you that you can qualify for a pension under new rules, regardless of the length of your contribution and non-contribution periods, or your work experience. You become eligible for benefits on the day you reach the universal retirement age, but not earlier than the month in which you submit an appropriate application. But remember, you must prove that you had any period of social or retirement insurance in your life.
How Is Your Pension Amount Determined?
Now, how is your pension amount decided? When a future retiree applies for a pension to ZUS, they determine its amount, which is the result of dividng the basis for calculating the pension by the average expected remaining life.
This average expected remaining life is the predicted number of months during which you’ll receive benefits. These averages are announced each year by the President of the Central Statistical Office and form the basis for calculating the pension for applications submitted from April 1 of the given year to March 31 of the following year.
But what forms this basis for calculating the new pension? I believe it’s the sum of three components:
- The adjusted contribution to the retirement insurance recorded on the insured person’s individual account until the end of the month preceding the month from which the pension is due,
- The adjusted initial capital,
- Funds recorded on the sub-account in the ZUS.
So, if someone in Poland would like to have a comfortable retirement, you need to understand these components and work on fulfilling them diligently.
Boosting The Pension in Poland – Re-Valuation
Here’s a thing you need to know: the amount of your pension can be influenced by the annual and quarterly revaluation of retirement contributions and initial capital, which are recorded on your account and on your sub-account.
I think it is worth saying that all the funds you manage to accumulate are subject to this revaluation.
Now, how does this revaluation work? It’s actually quite straightfrward. You multiply the recorded amounts of contributions on your account and sub-account by a revaluation rate relevant for that year.
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This revaluation rate for contributions and initial capital on your account is announced by the Minister of Family, Labor, and Social Policy in the Official Journal of the Republic of Poland, „Monitor Polski„, by the 25th day of the month preceding the revaluation date.
The revaluation rate for funds recorded on the sub-account is announced by the President of the Central Statistical Office by May 15 every year.
When determining the basis for calculating the pension, ZUS takes into account amounts recorded on the insured’s account and sub-account. However, not all of them are subject to annual revaluation. Hence, there’s also a quarterly revaluation, which separately covers the revalued contributions and initial capital on the account, as well as funds on the sub-account.
Minimum Pensions in Poland – The 2023 Figures
So, what is the lowest pension in 2023? Before the pension reform in Poland, pensions were granted not only based on retirement age but also after working a minimum length of service. ZUS is paying more and more pensions according to the rules of the new system, hence, payments below the minimum are being made, which amounted to 1338.44 zł gross in 2023. Unfortunately, penny pensions, which are hard to call a benefit, are a fact.
The right to a minimum pension at the specified amount applies to people who have reached retirement age, i.e., 60 for women and 65 for men, and have contribution and non-contribution periods of at least 25 years for men and 20 years for women.
Timing Your Pension Application
I can tell you that due to the implementation of quarterly and annual revaluation of contributions on the insured’s account and sub-account, and in relation to the initial capital, it is not recommended to apply for a pension in June of any given year. Doing so will result in lower benefits. So, if you want to maximize your pension, try to time your application wisely.