On Senior Citizens’ Day, the Ministry announced that from 2019 to 2023, during the second term of the Government of Law and Justice, nearly PLN 196 billion was allocated for pensioners and retirees. This figure covers yearly funds for pension and annuity indexation, plus additional resources for the 13th pension and, later, the 14th pension introduced by the same government.
In addition to this large transfer from the state budget to retirees, there is an ongoing annual contribution of at least PLN 10 billion. This amount funds the lowering of the retirement age, the tax changes including a PIT-free basic amount of PLN 30,000, and a reduction in the PIT rate from 17% to 12%. Also included are funds for free medicines for seniors aged 75 and above, and this year extending to those over 65.
It is noteworthy that the 13th pension, set at the level of the lowest benefit, was first paid in 2019 and became a regular, law-regulated supplement from 2020 onward. The 14th pension followed, with payments starting in 2021, and the 2023 benefit being a statutory provision as well.
The fruits of economic growth
Prime Minister Mateusz Morawiecki has described this approach to supporting pensioners as sharing the gains from strong economic growth with retirees. The aim is to ensure that the benefits of growth reach the community that relies on pensions, a group that has seen growth outpace many peers in the European Union.
As a result, the 13th and 14th pensions have become a stable part of the Polish pension system, serving as important additional support for retirees, especially for those with lower pensions, which constitutes a large portion of pensioners in Poland.
2021 saw a notable indexation of pension benefits at 4.16% (calculated as the 2020 inflation plus 20% of the real growth in the average salary in 2020), with the smallest increase being PLN 50. Overall, the extra resources directed to pensioners and disabled pensioners in 2021, both through indexation and the 13th and 14th pensions, amounted to nearly PLN 36 billion.
In 2022, the indexation required an additional budgetary expenditure of over PLN 20 billion, while payments for the 13th and 14th pensions exceeded PLN 12 billion and PLN 11 billion respectively, bringing the total to around PLN 44 billion.
In 2023, the indexation rate reached 14.8% (the Central Statistical Office’s average inflation was 14.4% with a 0.4 percentage point share of wage growth). The lowest guaranteed increase in benefits was PLN 250. Overall, almost PLN 45 billion went to indexation, and roughly PLN 30 billion covered the 13th and 14th pensions, creating a combined increase of about PLN 75 billion for the retirement community.
It is worth recalling that in 2015, under the previous government, the funds allocated for pension increases were only about PLN 3.6 billion, a figure that paled in comparison to today. The 13th and 14th pensions were not yet a reality during that period.
Multiple increases in retiree benefits
Throughout the years of the Law and Justice government, and especially in 2021–2023, the extra resources for pensioners rose dramatically compared with 2015. Projections suggest that, if the opposition were to gain power, the level of annual increases could revert to only a few billion zlotys per year.
In the 2024 draft budget, pension indexation is planned at about 12.3%, totaling around PLN 43 billion, with an additional PLN 35 billion earmarked for the 13th and 14th pensions, bringing the grand total close to PLN 80 billion. Although the indexation should be implemented by March 1 of next year, there is uncertainty about the continuation of the 13th and 14th pensions, as the new parliamentary majority considers withdrawing support for these measures.
All signs point to potential negative effects for Polish pensioners if the new parliamentary majority leads the government into cuts in pension funding as early as 2024, a situation that raises concerns about how the pensioner community would be treated by the new leadership.
Source: wPolityce