Polish state pension – How does it work?

Most expats I speak to expect little, if anything, from the Polish state pension system.

However, if you are employed in Poland, then both you and your employer will contribute a sizable percentage of your salary to it each month.

Therefore, it makes sense to at least understand the basics of how the system works.

The basics

If you are employed in Poland, then, each month, you and your employer will make state pension contributions totaling 19.52% of your gross salary; whether you like it or not.

These payments are split equally (i.e. you both pay 9.76% of your gross salary).

Therefore, if , for example, you earn PLN25,000 per month, you will pay PLN2,440 in state pension contributions and so will your employer.

Where does the money go?

First of all, it goes to ZUS – this is the Polish Social Insurance Institution (Zakład Ubezpieczeń Społecznych). 

Their main task is to take care of state old-age pensions, but they are also responsible for paying benefits like sickness, maternity, carer, and compensatory benefits, disability and survivor’s pensions, or funeral grants.

Out of the total 19.52% of your gross salary sent to ZUS, 12.22% will stay there (this is known as the first pillar).

The remaining 7.30% constitutes the second pillar. You can either send it all to a special ZUS sub-account, or choose to send 2.92% to an Open Pension Fund (OFE)* which is invested in the capital markets, with 4.38% going to the special ZUS sub-account. Most people go for the first open because it is simpler. 

*See Future Changes below

What do I get in return?

The Polish state pension is a pay-as-you-go scheme meaning that benefits depend strictly on contributions made.

You will receive a statement (in Polish) every year that tells you the following:

  • Payments made in the previous year.
  • The total balance of your main account (first pillar) and sub-account (second pillar)
  • A projection of the amount of pension that you can expect to receive at retirement.

Can the money that I pay towards Polish state pension be refunded if I leave Poland?

In a word, no.

Future changes

  1. It is expected that the OFE, having already been heavily diluted, will be phased out completely in the near future.
  2. The government has announced plans to introduce an additional pension element from the start of 2019. It is similar in principle to the Auto Enrollment system that was introduced a few years ago in the UK. Employers will need to provide an additional pension scheme to all employees and by law will have to contribute 1.5% of your salary. Employees will also be automatically enrolled into the scheme with a  contribution level set at 2% of salary. However, employees will have the option to opt out of the scheme. Clearly, if you do not plan to retire in Poland then opting out is likely to make sense.

Further reading

Social security in Poland – An English language guide from ZUS

The biggest pension reform in years – WBJ