Poland’s pension system: Stable on paper only

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

The OECD has recently published Pensions at a Glance 2025, an in-depth analysis of the pension systems of its member countries. The report is substantial – around 250 pages – so I have selected only a few noteworthy threads that help place Poland’s pension system in context alongside those of other countries.

Low future pensions in Poland

The chart below shows the so-called future net replacement rate. This is the ratio of net pension income to net earnings for a stylised individual entering the labour market at age 22 in 2024 and working until the statutory retirement age while earning the average wage throughout their career. OECD models are built on legislation currently in force.

For women in Poland, the net pension is expected to amount to roughly one third of net earnings. Men can expect a higher replacement rate – 41% – reflecting their longer working lives due to a higher statutory retirement age.

Both figures place Poland among the countries with the lowest replacement rates. Among women, only Lithuania ranks lower, at 28%. For men, Poland records the fifth-lowest net replacement rate across OECD countries. Compared with the OECD average, Polish women are projected to receive only about half the replacement rate (Poland 32% versus the OECD average of 62%).

The projected gap between female and male net replacement rates in Poland is the largest in the OECD, at around 25 percentage points for model earners on average wages. In most OECD countries, no such gap exists, reflecting an equal statutory retirement age for women and men.

Why future pensions will be low

Population ageing will translate into low pensions in Poland because of mechanisms embedded in the system itself. The 1999 reform introduced a defined-contribution scheme, strengthening the link between contributions paid in and benefits paid out.

What are these mechanisms? Poland’s system automatically reduces the level of newly granted pensions as life expectancy rises, in order to limit pressure on the public finances. Equally important is the way contributions are indexed.

Indexation of balances in ZUS (The Social Insurance Institution) accounts and sub-accounts depends on inflation, real growth in the total volume of contributions, and the average nominal GDP growth over the previous five years. The projected decline in the working-age population will weigh on both real contribution growth and GDP growth. As a result, future indexation rates are unlikely to be meaningfully higher than inflation.

The implication is clear: to maintain a reasonable relationship between pensions and wages, workers will need to stay in the labor market longer and begin drawing their pensions later.

An OECD outlier: the retirement-age gap between women and men in Poland

Only nine OECD countries still maintain different statutory retirement ages for women and men. In three of them – Austria, Lithuania and Switzerland – this difference will disappear no later than 2033.

The chart below shows the current statutory retirement age for women retiring in 2024 across OECD countries, as well as the future retirement age under existing legislation. In many countries, this legislation increases the retirement age – often linked to rising life expectancy.

In eight OECD countries, women’s future statutory retirement age will be the highest on record. Denmark stands out, with a projected retirement age of as much as 74. In this case, however, policymakers are considering softening the proportional (one-to-one) link between increases in life expectancy and rises in the retirement age. Some reforms are very recent, such as the one introduced in Slovakia.

Against this backdrop, Poland stands out. Only Turkey and Colombia currently have a lower statutory retirement age for women – 49 and 57 respectively. The EU average is 64, four years higher than in Poland. This gap is set to widen, as Poland – unlike most European countries – has no plans at present to raise the statutory retirement age for women. For women entering the labor market in 2024, the statutory retirement age in the EU is projected to rise to 66.6 years.

Effective retirement age

The statutory retirement age does not mean that everyone entitled to a pension retires immediately upon reaching it. Some take early retirement, while others extend their working lives. According to ZUS data, the average age at which Poles begin receiving pensions closely tracks the statutory age: in 2024, it was 60.6 years for women and 64.9 years for men.

A slightly different measure is the effective retirement age, which does not always coincide with the actual moment of retirement. Across the OECD, the average effective retirement age for women (63.6) is slightly below the statutory age (63.9). The largest gap in this direction is seen in Belgium, where the statutory retirement age is 65, but women leave the workforce on average at 60.6 – a difference of 4.4 years. Notable differences are also observed in Norway, Denmark, and the United Kingdom (around 3–4 years).

The effective retirement age for women exceeds the statutory age most sharply in Turkey – by 11.5 years – reflecting the country’s very low statutory retirement age for women (49 years). Significant gaps are also seen in Korea (6.6 years) and Japan (2.4 years), despite relatively high statutory ages of 63 and 65, respectively.

Poland falls into this group as well. According to OECD data, the effective retirement age for women in 2024 was 61.4 years, 1.4 years above the statutory age. For men, the effective age was slightly below the statutory level – by a similar margin.

Gender inequalities

In Poland, men live on average another 17.4 years after leaving the workforce – slightly below the OECD average of 18.7 years. The situation is reversed for women: Polish women can expect to live 23.6 years after retiring, 0.8 years longer than the OECD average.

It is important to note that these figures assume the individual survives to the point of retirement. According to World Bank data, more than 20% of men born in 1958 in Poland did not reach the age of 65 in 2023. This is roughly 10 percentage points lower than in developed Western countries or Japan, where the statutory retirement age is also 65.

By the same age, 90% of women born in 1958 in Poland survived. Consequently, the likelihood of receiving a pension is even higher for women, given their lower statutory retirement age of 60.

In virtually all OECD countries, women can expect to live longer than men after leaving the labor market. The main driver is differences in life expectancy between the sexes, but part of the gap also reflects the age at which people typically leave work – largely determined by statutory retirement ages. In Poland, this gender gap is the largest among European OECD members.

Institutions

The chart below shows the share of new retirees who continued working within six months of receiving their first pension in 2023. This practice is most common in the Baltic and Nordic countries, but the motivations differ. Baltic retirees typically cite financial reasons, whereas Norwegians and Swedes more often mention enjoyment of work and maintaining social integration as their main drivers. The lowest share of continued employment is seen in Southern European countries – Italy, Spain, and Greece.

Institutional arrangements also matter. In Poland, starting to draw a pension requires terminating one’s employment contract. This rule still applies in seven other OECD countries (e.g. Italy, France). In ten countries, working retirees pay contributions on their earnings, but these do not affect the future pension – effectively an additional tax on wages that discourages continued work (e.g. Belgium, France, Spain). Sixteen OECD countries impose no restrictions on combining work with a pension, including no requirement to end employment (e.g. Denmark, Sweden, the UK, the US).

Poland has a relatively low share of new retirees who continue working – around 14%. Poland’s Development Strategy to 2035 proposes measures to encourage longer labor-market participation, such as reducing working hours for those who have qualified for a pension but wish to remain employed.

Incentives to work longer are not universal

As noted, net replacement rates are estimated assuming a given level of earnings throughout a career. For lower-wage earners, the figures are even further below the OECD average. A man in Poland earning 50% of the average wage (roughly comparable to the minimum wage in many countries) can expect a pension equal to 41% of his net pay, compared with an OECD average of around 75%.

This reflects the mechanisms described above, as well as the less redistributive nature of the Polish pension system.

Importantly, according to the OECD model, the replacement rate in Poland for women will be nearly the same as for men – 42% – despite their shorter working careers. This implies that for many women, raising the retirement age would not result in higher pensions. Presumably – without access to the full model – this stems from the institution of the minimum pension. This represents a serious systemic issue, weakening incentives for extended participation in the labor market.

Conclusion: Stability on paper

The OECD’s summary for Poland notes:

“Given the strong link between contributions and benefits under the defined-contribution system, and the projected sharp decline in the working-age population, raising future pension levels can be achieved primarily through increasing the effective retirement age and/or higher contribution rates, which at 19.52% are slightly above the OECD average despite faster population ageing.”

The defined-contribution system theoretically keeps state pension spending under control. Projections show this spending remaining broadly stable as a share of GDP. The open question, however, is whether these forecasts are more “on paper” than realistic. In the face of an ageing population, financial stability is possible only by reducing the future standard of living for retirees.

Believing that such low future pensions will be socially accepted is a utopia. We are already seeing early signs in the introduction of the so-called 13th and 14th pensions, as well as changes to widow’s benefits – especially in light of Poland’s future demographic structure.

While the issue of raising women’s retirement age occasionally resurfaces in public debate, far less attention is paid to the adequacy of current contribution rates. Equally important is the interaction between these factors, as illustrated by the minimal impact of longer working lives on pension levels for those earning close to the minimum wage. Institutional arrangements also play a role – such as the requirement in Poland to terminate an employment contract to start drawing a pension – which reduces the system’s flexibility.

The future net replacement rate is the ratio of net pension to net earnings for an individual entering the labor market at age 22 in 2024 and working until the statutory retirement age. For someone earning the average wage, this rate in Poland is projected to be around 32% for women, while men can expect 41% due to their longer working lives. Both figures place Poland among the countries with the lowest replacement rates in the OECD.
Population ageing will lead to low future pensions in Poland because of mechanisms built into the system. The Polish system automatically reduces newly granted pensions as life expectancy rises, in order to limit fiscal pressure. In addition, the projected decline in the working-age population will slow both the growth of real contributions and GDP. Since pension indexation depends on these factors, the value of future pensions will be constrained.
The defined-contribution system theoretically keeps state pension spending under control. Projections show spending remaining broadly stable as a share of GDP. In an ageing society, however, this is possible only through a substantial reduction in the future standard of living for retirees. Such low benefits appear politically unrealistic. Raising future pension levels would require primarily increasing the effective retirement age and/or higher contribution rates, which at 19.52% are slightly above the OECD average, despite Poland’s faster population ageing.