Open Pension Schemes – the Effect of Pension System Privatization

Abstract

Open Pension Schemes in Poland (OFE) result from the privatization of
the pension system implemented in response to the World Bank demands.
The privatization of this kind has been implemented only in a few countries
in the world, in Latin America, Asia and East-Central Europe. Practically, it
turned out that the existence of an obligatory capital pillar became the main
source of public debt and as a result a threat to the stability of public finance.
In Poland, since 1999, half of the increase in public debt has been caused
by OFE. The continuation of the obligatory capital pillar maintenance will
result in the necessity to raise taxes and reduce important public spending.
Financing OFE by increasing public debt may become impossible because
of the precautionary public debt thresholds specified in the Act on Public
Finance and the Constitution. Additional limitations result from the necessity
to undertake action indispensable in order to make the Council of the European
Union lift the procedure of excessive deficit imposed on Poland in 2009.