Tuesday, July 12, 2016

Lowering the retirement age: Justice found the money to finance this promise – Interia

Jaroslaw Kaczynski, the president of PiS / photo. Mariusz Gaczyński / East News

At least 3 billion zł government will gain if you stop in the ZUS contribution sent to the pension funds. Today she is in I and II pillar of 19.52 percent. assessment basis. If someone has declared that he wants to save the OPF is 2.92 percentage point. Of this sum is transferred to private pension funds, and compensates for the equivalent of ZUS those budget. This year, the total compensation for the Department of the transferred premiums will amount to 3.2 billion zł.

If the proposal by Deputy Matthew Morawiecki changes in the pension system will come into force, 75 percent. assets of the funds will go to individual pension accounts of pension fund members, but the contribution of 19.52 per cent. It will be fully in ZUS. That’s a profit of approx. 3 billion zł per year.

Gains may also give the second part of this operation. For the Demographic Reserve Fund is expected to hit 25 percent. current assets of the funds. – The government may, within the reach for that amount, but I do not think that is your choice. Rather, the decision will be a gradual liquefaction assets, eg. In 10 years, it gives us an extra 3 billion zł. Although it will be difficult from the point of view of social communication, because FRD shown as a reservoir of money for decline in replacement rates in the future – notes Jakub Borowski, chief economist at Credit Agricole. The fund was created to supplement the deficit in the Social Security Fund of the deteriorating demographic situation.

But the government can also do otherwise. Pawel Borys, head of the Polish Development Fund, which manages the FRD, cites the example of a similar fund in Norway, which can supply up to date budget of the country a sum not higher than the annual profit. According to our calculations, the profit could reach 2.6 billion zł in 2018.

As you can see the profit potential for the public finances from both sources to 5.6 billion zł. Of course, the program assumes a variety of relief and deductions, which in turn would cost the budget. Not entirely clear the fate of the so-called. slider, or gradual transfer of savings from the OPF to ZUS during the 10-year period before retirement. The logic of change speaks for its winding up, but the Ministry of family, work and social policy green light even in this case did not give. – Not entirely clear how the system will look like in the final version. If the slider is maintained, it would be a benefit for the public finances – says Lukasz Kozlowski expert of Employers RP.

The government has one more opportunity to get additional income. According to the law VAT rate should fall by 1 percentage point. from 1 January 2017., but it appeared the announcement that this does not happen and autumn VAT Act will be amended. In this case, the budget would be an additional 7.6 billion zł.

As a result, the money saved on premiums transferred today to pension funds and changes in FRD when combined with the lack of VAT cuts a total of 14.2 billion zł. This amount should cover the cost reduction of the retirement age. With the updated convergence program adopted by the government in April, we know that the Ministry of Finance estimated it at 10.2 billion zł in 2018. MF established the maximum option, ie the reduction age to 65 years for men and 60 for women, without any additional conditions, as internship. So, as it at the moment is on the table. – Of course, the criteria for retirement can be slightly tightened, then the consequences for the public finances will be smaller – notes Jakub Borowski.

From this simple simulation shows that the ruling Law and Justice profitable to play for time and realize its key promise in 2018 r., ie shortly before the election. At least two reasons.

First, the financial: the budget is not able to bear the cost of the reversal of pension reform PO in the next year. It is true that it would be lower than a year later (according to MF 8.6 billion zł), but state finances will and without this very tense. In 2017. You will have to pay the full 22 billion zł from the “Family 500 plus.” And on the other side of the balance sheet – income – the situation is quite uncertain. MF assumes that higher spending will finance the higher tax revenues – the seal of the tax system is to give from 6.5 billion to 16.7 billion zł in 2017. But even getting those amounts will maintain discipline in finance.

Lowering the VAT increase in the deficit to 2.9 percent. GDP. It is close to the ceiling of 3 percent. GDP, the Finance Ministry does not want to exceed. An additional 8 billion zł loss of income FUS from the reduction of the retirement age, which would have to probably finance a subsidy from the budget, it will increase the deficit by about 0.4-0.5 percentage points. GDP.

The second reason is political. Lowering the retirement age shortly before the election may be the strong point of the election campaign. Just as the introduction of tax uniform (also to enter into force in 2018.), Which is to be designed so as to decrease the load of the smallest income, consuming thus promise to increase the amount of free PIT while maintaining neutrality on the budget.

The reduction in retirement age may, however, threaten, eg. reduction rating. – Reaction agency would depend on the results of the simulation showing, if due to the lower age will fall economic activity and the assessment of the impact on public finances and GDP growth – notes Jakub Borowski.

Marek Chądzyński, Grzegorz Osiecki

07/11/2016

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