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16 Jan 2009

Retirement Behaviour in Poland and the Potential Impact of Pension System Changes

Agnieszka Chlon-Dominczak

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European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 63 / 22 pages

This paper focuses on retirement behaviour in Poland, especially early withdrawal from the labour market. It shows that retirement ages are very low, which can be attributed to the current regulations of the old-age pension system, as well as other pre-retirement transfers. The age of retirement is closely related to the legal framework of the pension system and changes that can be observed follow changes in legal regulations. The logit model constructed to measure the impact of selected individual characteristics on retirement shows that gender and education level have the greatest influence on retirement age. Women and persons with lower educational attainment usually retire earlier. Also, employees in the industrial sector tend to retire at a younger age. Higher wage levels before retirement provide incentives to work longer.
Changes introduced in the new pension system, particularly the launch of the pension formula that links the old-age pension level to the contributions paid and life expectancy at retirement age, alters the incentives for future pensioners. Postponing retirement leads to significantly higher pension levels. As a result, it is expected that after 2008, the retirement age in Poland will rise sharply. Still, incentives will only work if society is provided with information about the pension system.