Bartek
4th February 2014, 02:00
Hello everyone!
Here is some information from Poland about how everyone here got just robbed by our own government.
Whole issue is about Zakład Ubezbieczeń Społecznych, commonly referred to as ZUS. ZUS is a state organization established in 1934, responsible for social insurance matters.
To give you some background, current pension system in Poland was introduced in 1999 (Jerzy Buzek was prime minister) and is based on 3 pillars:
a) mandatory - based on ZUS, basically this org takes a part of person's monthly income (based on how much a person earns) and "stores" it for future pension - stores virtually, because in reality money are being paid right back to people who at the moment already are entitled to a pension
b) mandatory - based on non state funds (called Otwarty Fundusz Emerytalny, OFE) which also get a part of monthly income, but do not pay anyone; instead money managed by these funds are being invested, depending of a given fund's strategy (usually very calm and safe financial instruments)
c) optional - based on individual pension funds (also non state), sort of similar to other savings but much longer in terms of time-range; in order to participate, a person needs to open special account in a chosen fund and makes payments freely
So what is the fuss? In 1999 we as citizens were told that now we are so nicely served because our money will be guaranteed by the state (ZUS) and also invested by dedicated companies (OFE) - so our pensions will be high. Then if we want to be even safer, we can use the 3rd pillar and make additional savings. Back then sounded kinda nice ;).
Thing is that ZUS is broke. And I mean really broke. According to some reports[1], in 2014 ZUS will have a deficit of 21.34B USD - in one year only! Why? There are various reasons, a material for a separate thread, but to point some obvious:
1) ZUS is terribly managed - their operating costs in 2011 were around 2,2% (around 1.27B USD)[2] of all money they managed (for example in Sweden it is 0,8%[3])
2) ZUS basically functions as a Ponzi scheme - in order for people to get money out, there has to be more people to put money inside it. In reality, according to OECD.org report (sorry can't provide direct link, quoting from article [1]) at the moment for every 100 employed Polish citizens, there is 18 on pension (meaning that these 100 need to earn for pensions of those 18); in 20 years it will be 100 working for 35, and in 2060 its estimated 100 working for 65 - you know what I mean.
3) We have dramatic demographics in Poland - people either don't have kids or have just one because they simply cannot afford to have more - plus it is estimated that ~1.7 million Polish citizens emigrated to other EU states after laws regarding working there have been relaxed (recent comments from British prime minister should ring a bell)
So to sum it up, we have a state organization which can't do what it is supposed to do. What do our politicians do to resolve it? Yes you got it right - a bailout.
They made a law - took money which people already stored in OFE and forced it back to ZUS, to fuel this dying institution. Starting 3rd Feb, 14:00 CET all OFEs began transferring money to ZUS. In total it is 48.74B USD. Money which will never be seen again by people who earned them.
[1] http://biznes.onet.pl/dziura-w-zus-ie-bedzie-znacznie-wieksza-niz-zaklad,18490,5394553,news-detal
[2] http://www.sejm.gov.pl/sejm7.nsf/InterpelacjaTresc.xsp?key=70EC10D3
[3] http://pl.wikipedia.org/wiki/Zak%C5%82ad_Ubezpiecze%C5%84_Spo%C5%82ecznych#cite_note-36
PS. This is my first thread ever on Avalon. I tried to make it as informative and documented as possible, although on the other hand I don't want to make it bloated :). One thing I am not sure of: is this sort of information interesting for you guys? If so, I'll do my best in case of any questions + any other feedback is more than welcome.
Here is some information from Poland about how everyone here got just robbed by our own government.
Whole issue is about Zakład Ubezbieczeń Społecznych, commonly referred to as ZUS. ZUS is a state organization established in 1934, responsible for social insurance matters.
To give you some background, current pension system in Poland was introduced in 1999 (Jerzy Buzek was prime minister) and is based on 3 pillars:
a) mandatory - based on ZUS, basically this org takes a part of person's monthly income (based on how much a person earns) and "stores" it for future pension - stores virtually, because in reality money are being paid right back to people who at the moment already are entitled to a pension
b) mandatory - based on non state funds (called Otwarty Fundusz Emerytalny, OFE) which also get a part of monthly income, but do not pay anyone; instead money managed by these funds are being invested, depending of a given fund's strategy (usually very calm and safe financial instruments)
c) optional - based on individual pension funds (also non state), sort of similar to other savings but much longer in terms of time-range; in order to participate, a person needs to open special account in a chosen fund and makes payments freely
So what is the fuss? In 1999 we as citizens were told that now we are so nicely served because our money will be guaranteed by the state (ZUS) and also invested by dedicated companies (OFE) - so our pensions will be high. Then if we want to be even safer, we can use the 3rd pillar and make additional savings. Back then sounded kinda nice ;).
Thing is that ZUS is broke. And I mean really broke. According to some reports[1], in 2014 ZUS will have a deficit of 21.34B USD - in one year only! Why? There are various reasons, a material for a separate thread, but to point some obvious:
1) ZUS is terribly managed - their operating costs in 2011 were around 2,2% (around 1.27B USD)[2] of all money they managed (for example in Sweden it is 0,8%[3])
2) ZUS basically functions as a Ponzi scheme - in order for people to get money out, there has to be more people to put money inside it. In reality, according to OECD.org report (sorry can't provide direct link, quoting from article [1]) at the moment for every 100 employed Polish citizens, there is 18 on pension (meaning that these 100 need to earn for pensions of those 18); in 20 years it will be 100 working for 35, and in 2060 its estimated 100 working for 65 - you know what I mean.
3) We have dramatic demographics in Poland - people either don't have kids or have just one because they simply cannot afford to have more - plus it is estimated that ~1.7 million Polish citizens emigrated to other EU states after laws regarding working there have been relaxed (recent comments from British prime minister should ring a bell)
So to sum it up, we have a state organization which can't do what it is supposed to do. What do our politicians do to resolve it? Yes you got it right - a bailout.
They made a law - took money which people already stored in OFE and forced it back to ZUS, to fuel this dying institution. Starting 3rd Feb, 14:00 CET all OFEs began transferring money to ZUS. In total it is 48.74B USD. Money which will never be seen again by people who earned them.
[1] http://biznes.onet.pl/dziura-w-zus-ie-bedzie-znacznie-wieksza-niz-zaklad,18490,5394553,news-detal
[2] http://www.sejm.gov.pl/sejm7.nsf/InterpelacjaTresc.xsp?key=70EC10D3
[3] http://pl.wikipedia.org/wiki/Zak%C5%82ad_Ubezpiecze%C5%84_Spo%C5%82ecznych#cite_note-36
PS. This is my first thread ever on Avalon. I tried to make it as informative and documented as possible, although on the other hand I don't want to make it bloated :). One thing I am not sure of: is this sort of information interesting for you guys? If so, I'll do my best in case of any questions + any other feedback is more than welcome.