Pension funds similar to the Polish ones were introduced in about thirty countries. All of them, apart from Sweden, are developing countries, which sought assistance from international institutions almost every time they introduced a reform. Can we then claim that developed Western countries resisted the outside pressure and purposefully did not agree to Open Pension Funds (OFE), choosing to maintain the pay-as-you-go system? Definitely not.
The process of retreating from the pay-as-you-go systems monopoly takes place virtually all over the world. In developed countries it took a slightly different shape than, for example, in Poland. We endeavoured to investigate those differences. Firstly, we need to recall what are the distinct features of OFE. These pension funds are:
- privately managed;
- funded from compulsory contributions;
- managing the funds redirected from the pay-as-you-go system.
Such funds are indeed absent in Germany, the Netherlands, the USA or any highly developed country, except for aforementioned Sweden. That said, privately managed pension funds are not in short supply in any country. As we will see in a moment, feature (b) also occurs much more commonly than we in Poland may think.
The fact that the West does not have OFE is decided by the last trait. It wasn’t resolved anywhere to reduce the contributions to the pay-as-you-go system – pension funds are financed by additional contributions from employees, employers and the state. This solution was a natural choice in developed countries, where workers are less likely to avoid contributions due to higher earnings and greater confidence in the pension system. In Poland, however, the approval to raise the pension contributions wasn’t obtained, as they were already higher than in many more prosperous countries, such as France, Switzerland or the United States. There was too much room for savings in the system, for instance the disposal of pension benefits or early retirement, that allowed for additional expenditure. It could be said then that the introduction of mandatory private pension funds in Poland was accompanied by the actual reduction in social security contributions, what for various reasons did not happen in wealthier countries. That was the main difference in the way the fully-funded pillar was introduced. There is less difference between Poland and the West in regard to obligatory nature of OFE membership, since even developed countries frequently applied measures that did not really differ from compulsory signing up in OFE. It is more extensively described in TEP (Association of Polish Economists) report ‘Additional pension fund in Poland – an assessment and recommendations for change’ that was published this year. In the Netherlands, for example, employers are obliged to create occupational pension schemes, and employees are obliged to join. As a result, the level of participation in the system, also based on private pension funds, reaches 94%. In other countries the high participation is achieved by very generous state aid (in the form of tax exemptions or direct deposits) or enrolling all new employees by default, with the opportunity to annul membership individually. Such solutions are not, strictly speaking, obligatory, as one does not have to belong to any fund; this is achieved, however, at the cost of considerable effort and the loss of state aid. Therefore, in practice, hardly anyone chooses it. From this perspective, Polish coercion is at least straightforward – there is no Orwellian ‘quasi-voluntarism’. The state enrolled everyone due to the belief that saving for retirement is in the general interest. An additional argument for compulsory membership was the fact that the system encompassing everyone is cheaper for future retirees.
