Social services


Poland reverses World Bank-promoted pension scheme

31 March 2014

In early February, the Polish government took back control of $51 billion of privately run pension funds to overturn a 2013 budget deficit of almost 5 per cent. Poland’s finance minister Jacek Rostowski clarified that the funds were “never privatised” as they were “part of the public pension system” but “diverted to private asset management”. In 1999 the World Bank’s promotion of privatisation of pensions steered Poland, to reform its pension from a pay-as-you-go system to what is called the Pillar II scheme, based on Chile’s pension privatisation in the early 1980’s. The Financial Times (FT) newspaper commented in early February that “[pension] management fees could be as high as 10 per cent, creating a hole that governments had to fill by raising more debt.”

However, Bank staff continued to deny that their advice contributed to Poland’s problems. Bank staffer Anita Schwarz speaking to the FT instead blamed Poland’s falling fertility and European migration: “neither were built into forecasts at the time”. However professor Leokadia Oreziak of the Warsaw School of Economics wrote in the Green European Journal in February:“We come to an absurd situation – the need to pass the money to the private pension funds creates budget deficits. The government needs to borrow money, also from Open Pension Funds (OFE). It looks like it first lets the money go, and later on it borrows the same money, creating profit for private financial institutions. It is nonsense and a huge mismanagement of public funds.”