The Polish parliament passed a bill lowering the retirement age on November 16. The ruling party Law and Justice (PiS) made the reform a key pledge in its election campaign last year, despite warnings from analysts on the cost to the budget.
The legislation will lower the retirement age to 65 for men and 60 for women. The reform is set to take effect in October 2017, unraveling the reform carried out by the previous government Civic Platform that raised the retirement age to 67 for both sexes.
Analysts have warned that the move will likely result in a considerable lowering of pensions and multi-billion costs for the budget. The government hopes fast economic growth and improved collection of taxes will cover the tab. That may be too optimistic an assumption, Fitch warned in late August.
Harbingers of a slowdown in economic growth could complicate matters further. The budget has one-off cash injections that will limit the deficit in 2016 to cover inflated expenditure, but not next year. However, the real effect of the reform on spending will not become apparent until 2018.
Powered by a majority in both houses of parliament, and a friendly president, PiS is busy pushing its populist agenda. Warsaw has already launched a child benefit programme and is mulling increasing the income threshold, with costs estimated at tens of billions of zloty.
While there are no definite calculations of the cost of lowering the retirement age, the government suggested in July the bill could hit PLN10bn (€2.3bn) per year. However, state social insurance institution ZUS claims the cost could actually rise to PLN40bn-PLN50bn.
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