Thursday, July 14, 2016

Indexation of pensions: Benefits take into account the GDP growth – GazetaPrawna.pl

According to our unofficial information, the Ministry of family, work and social policy, as well as ZUS looking for a target formula of pension indexation, which would take into account the growth of GDP. This situation changed in recent years: in spite of good growth above 3 percent. GDP indexation of benefits was only symbolic. Reason? Deflation, or falling prices. The current statutory formula increases to inflation with the addition of at least 20 percent. wage growth. Therefore, the negative price index decreased, which was used for calculations. As a result, within two years valorization did not exceed 1 percentage point., And the current was only 0.24 percent.

Adding indicator of GDP or any part thereof to the formula of its calculation has changed the situation. – Valorisation will be higher. This means that to increase their share in GDP. As a result, pensions will grow faster – explains Jakub Borowski, chief economist at Crédit Agricole.

How much faster will know when we know the formula for increases. It is not known also, whether the GDP it would refer only to the pensioners with the lowest benefits, or to all. Certain it is also that the GDP in this formula will work always or only in years in which there is deflation. According to Borowski, if force in times of inflation, and with pre-crisis levels, can lead to spectacular increases in benefits. In this case, problems reach the budget. According to calculations by the Ministry of the family increase pensions for each percentage point is an additional cost to the state of more than 2.2 billion zł per year.

Work on the new indexation mechanism coordinating minister Elżbieta Rafalska. Its task is to develop a new formula increase, which has also lead to an increase in the lowest benefits. GDP indicator is a new concept, yet preliminary. Remember, however, that is still in the game are also other concepts, although their importance last fall.

Why? First, according to our information, the Ministry of Finance does not insist now that a significant part of the increase was passed in the form of disposable accessories. Resort opted for this because it caused that the sum of money allocated for benefits, which are subject to indexation and permanently increase the budget spending was smaller. In practice, this would mean slightly less headache for the finance minister when it comes to permanent budgetary commitments, but the Ministry of Finance recognizes now that it will be able to finance spending growing even in a sustainable manner with budget revenues.

on the other hand, increasing the pressure unions to change the indexation rules. For now, talk about next year’s increases in pensions at the Council for Social Dialogue ended in a fiasco. But it is because the government does not intend to tie their hands until they prepare a new concept of indexation. Therefore, the pre-proposed statutory level – inflation plus 20 percent. real wage growth – which according to forecasts would amount to 0.88 percent. and cost the budget 1.680 billion zł.

compounds during the negotiations want to raise the indexation rate to 2.35 percent. But their strategic goal is to increase the lowest benefits.

Wieslaw Tarnowska from OPZZ says that it would be increased by up to 200 zł and enter into the formula increases the principle that deflation does not reduce the rate of indexation. On the other hand, according to Henry Nakoniecznego of Solidarity, you can enter a different pattern of increases for receiving the lowest benefit, based on the calculation of the cost of living just this group of beneficiaries. As pointed out, if that were the case, from 2008 to 2015. Lowest benefits for pensioners would increase by 15 per cent., More than would result from the current formula for indexation.

Theoretically, the game is even the lowest increase in benefits, eg. 100 zł. This variant does not preclude the Minister Rafalska. The government may change the current formula for raises and such. Differentiate them according to the amount of benefits, while maintaining the principle that all are at least indexed for inflation and the lowest addition, for example. By at least 50 percent. wage growth.

Decisions on this matter will be announced in August or September, when the government is finishing work on the budget.

The most certain element of the new solutions are money. The Finance Ministry assumed that indexation will be approx. 1.6 billion zł, a one-time additions of 1.7 billion zł, which means that next year’s increases in pensions need to close a total of 3.3 billion zł.

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