One of the elements of changes in the pension system is the so called “safety slide mechanism”. It means that capital accrued on one’s account in a private pension fund will have to be gradually transferred to ZUS 10 years before retirement. It is estimated that 4 bn PLN will be taken away from OFEs each year.
While answering the question about the risk associated with choosing OFE, it is hard not to think about the rationality of the slide mechanism. Contrary to its name, it does not offer any guarantee that investment in OFE will become materially safer. On one hand, we are protected from the situation in which retirement happens just after a stock market crash. On the other hand, it shortens the period during which we can recoup hypothetical losses incurred earlier. Until suitable simulations are conducted, it is unknown which of the two effects will prevail. Calculations prepared at WISE indicate that the mechanism is not the best tool from the point of view of future retiree’s interests.
For a person 42 years before retirement who earns the average salary and saves in a private pension fund (OFE) the slide lowers the future pension by 160 PLN on average. The benefit from choosing OFE is thus lowered from 496 to 336 PLN on average. At the same time, the probability that pension received from OFE would be smaller than the one from the sub-account at ZUS rises only slightly. For a 40 year old who still has 27 years to his / her retirement, the situation is even worse. Pension from OFE will be lowered by 57 PLN by the slide mechanism, and the advantage that this choice has over ZUS, drops nearly by half. In exchange, the probability that the pension from ZUS would turn out to be higher, rises from 14.55 to 14.8%. The slide will have the highest impact on people closest to retirement. For them, the mechanism erases any benefits from OFE almost completely, while increasing the risk associated with choosing a private pension fund.
Full article is available on Rzeczpospolita’s website (PL)
