Sunday, 4 August 2013

Pension funds – awaiting the resolution

Low season is reaching its nadir. Summer, that according to long-term forecasts issued in May was supposed to end in June, brings weather ideal for those holidaying and not enviable for those having to work. In the meantime, far in the background, the government runs consultancies on the future of pension system in Poland. The temperature of public discourse is not as hot as in the last days of June, when variants of pension system turnaround were unveiled, yet at some moments emotions are running high.

Last Tuesday Jacek Żakowski invited for his radio interview in TOK FM prof. Leokadia Oręziak – probably the most avid academic critic of private-run pension funds. Her view of the issue is more or less the total contradiction of what Mr Balcerowicz advocates. Whoever wants to acquaint with the problem, can read the transcript, I will only take the liberty of pointing your attention to comment thread. In the last weeks I began to observe a shift in Poles’ view of pension system reform. In brief – Poles badly assess performance of private-run pension funds and costs (including charged fees) they generate, but discern superiority of pension funds over state-run social security fund (the lesser of two evils). The superiority consist in the fact pension funds are a pool of real assets, while the social security fund has no money, just a book record. Commentators frequently argue whether the assets in pension funds belong to them or not, quoting manifold arguments to underpin their assertions, some resort to insults to prove their supremacy :)

I particularly liked one comment (not remember where I read it) in which someone aptly noticed those who now are trying to capitalise on demonising pension funds and urge on scrapping them might in a few months end up is management or supervisory boards of newly created state-run institutions managing assets taken over from pension funds…

Some time ago I mentioned my futile attempt to check correctness of calculation of returns fetched by two pillars of the pension system. Last week the ministry of finance responded to accusations of Komitet Obywatelski Bezpieczeństwa Emerytalnego (literally: Civic Committee of Pension Security, abbr. KOBE) regarding wrong methodology in government’s calculations. The whole, 35-page-long response is available here. Whoever wishes to drill down into its, good luck, I see some more productive activities for Sunday summer afternoon, but one day I will probably revert to that document. So far the Civic Committee has not issued any announcement after the government’s counter-report. I leave the assessment up to you and can only bring two statements to your attention:
1) “prof. Marek Góra (...) Pytany, czy weryfikował obliczenia rządu i obrońców OFE, odpowiada, że nie. - Wyliczenia przygotowali znakomici ekonomiści, którzy nie mogą się mylić. Ministerstwo Finansów nie ma takich ekspertów” – these words have wound me up. There are no infallible people, even the most outstanding economists can be wrong and blindly trusting somebody on account of their impeccable academic credentials is appalling!
2)Wyniki przedstawione w opracowaniu pokazują jak wrażliwe są one na przyjęty zestaw założeń „upraszczających"; w szczególności dowodzą, że w zależności od formułowanej hipotezy możliwy jest taki dobór mierników efektywności, aby wnioski z ich zastosowania przemawiały na korzyść OFE lub I filaru w ZUS” – this is what the whole dispute is all about and why it might never cease. Given multitude of variables and simplifying assumptions one has to make, there is plenty of room for manipulation. Tack on the pressure for reaching a specific outcome (the government wants to prove superiority of ZUS, while pension fund defenders will seek to prove superiority of OFE – look at KOBE’s webpage – am I only one who has impression their goal is to save pension funds, not the benefit of future pensioners?) and you will realise dashed are the hopes for finding impartial calculations…

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