Indexation of pensions in 2016 will be lower than the government thought. It could even be negative – Interia

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Polish pensioners must be prepared to cut? / © 123RF / Picsel

It is a situation in which deflation and will simultaneously decline in wages. In this case the current rules on indexation will mean that pensions would have to be reduced. Reason? The rules in a mechanical way describe how it is calculated increase in benefits. The basis for indexation rate are the two data from the Central Statistical Office.

The first is the average annual inflation rate for the previous year. Taken into account is either general or specifically calculated for households of retirees and pensioners (considered a more favorable rate). The second component is to add to the inflation rate of at least 20 percent. real growth of average salary in the previous calendar year. Will it be more than 20 per cent., The government is determined after consultation with trade unions and employers in the middle of the year, when are known the budget of the following year. For several years, the government leaves the index at 20 percent.

In February the minister of family and employment based on inflation rates and real wage growth provided by the Central Statistical Office announces the indexation rate. It does this automatically and there is no freedom. And here is where the problem may appear. Now, if inflation and real wage growth is negative, it will also be negative revaluation rate and in such a case, according to the provision, pensions should be cut down.

– The current provision of valuation we have two fuses. Indexing for inflation prevents the loss of real value of benefits, and adding to at least 20 per cent. real wage growth will ensure that the increase of pensions will follow the real growth of wages in the period of rapid economic growth. It seems that it should find a third fuse to prevent nominal reduction in pensions and disability – says, “DGP” Marcin Zieleniecka, deputy minister of labor and social policy.

At the same Act there is a provision for indexation of contributions to the pension account ZUS (it works on a similar principle: inflation plus real growth rate of contributions to the pension). He says that “the result of indexation balance may not be lowered.”

– From a purely economic point of view, leaving aside social considerations, it is rational it would seem that if there is a decline in prices and wages, Retirement is also nominally do not have to grow – says Marcin Mrowiec, however, the chief economist at Bank Pekao. According to him, the risk of negative indexation is not a theory. Such a situation as deflation and a decline in wages may occur and some economies are already painfully przećwiczyły. In Polish conditions, it seems unlikely now. But by the end you can not rule out such a scenario.

The indexation has already scraped by a factor of zero.

GUS has data on the level of prices in 2015. The average annual inflation rate was negative: PLN -0.9 per cent., and for households of retirees and pensioners was -0.6 percent. The latter will therefore be the basis for calculating indexation rate.

We do not know yet what was real wage growth in the economy – the index will be announced in early February. But we can assume the government forecast of justification for the budget law for 2016. Cabinet Awl Beaty founded the nominal increase of 3.5 percent. In this case – as calculated – real wage growth would be 0.9 percent. higher, which would amount to 4.4 percent.

So 20 percent. This indicator used in the calculation of the indexation rate is 0.88 percent. From this you subtract the deflation of households and pensioners. As a result, the indexation rate may reach 0.28 per cent., Almost half less than the established government.

This means that the lowest pension will increase by 2.50 zł, and the average of 5.60 zł. These calculations show one more thing. If the rate of real wage growth was 3 per cent., The pension does not rise or about a penny. Therefore, the Parliament adopted the law on single supplements for pensioners who have to sweeten slight increases. Extras in height from 400 to 50 zł to be paid together with the indexation of persons whose benefit does not exceed 2000 zł according to the rule: the lower the supply, the higher allowance.

Marek Chądzyński, Gregory Osiecki

27/01/2016