EUROPE - The Polish government is to slash the contributions it makes to private-sector pension schemes from 7.3% to 2.3%, diverting the balance into the first-pillar pension scheme ZUS.

Under plans announced this week, contributions to third-pillar pension plans will increase to 5% in 2017.

However, economist Krzysztof Rybiński told IPE that ZUS was heading for insolvency, with 11m workers supporting 12m pensioners within 30 years.

Prime minister Donald Tusk said this week the government had “no other option” if it hoped to plug the PLN190bn (€22.6bn) deficit in the state scheme.

But Dariusz Stańko, a pensions specialist at the Warsaw School of Economics, said the government had in fact increased the risk of insolvency by taking on private-sector pension liabilities.

“Such a scenario, in light of future demographic ageing and consequently low economic growth, is very likely,” he said.

“This decision in fact switches the burden of the state’s future pension liabilities from today to the future, so it will be either higher taxes in the future or lower pensions for current workers in the future.”

According to local newspapers, Tusk said he would rather lose the election than deprive citizens “because [I] didn’t have the guts to reform the pension plan”.

However, Stańko said government ministers had shown themselves to be “afraid of taking any active reformatory measures that would endanger their political existence”.

He cited the failure to implement the compromise agreed by five out of seven of the government’s social partners to keep the initial level of contributions at 3.5% after 2017.

As a result, he said, it would be impossible to introduce measures recommended by an expert panel last year, including the introduction of life-cycle portfolios, external benchmarks, a new system of performance-related fees and solvency measures.

“The government decided not to seek ways to curb the public debt through reforms, but chose the much easier way of creative accounting to lift up the public deficit and public debt ratios,” said Stańko. “From the economic point of view, the debt has not been reduced.”

The pension plan is the latest in a series of economic reforms that include cutting the budget deficit to 3.2% of GDP by 2012. The deficit currently stands at 7.9%.

In a letter to the European Commission earlier this week, finance minister Jacek Rostowski also outlined “significant cuts” to spending on unemployment and funerals.