Additional indexation of pensions and annuities. Will it be there again this year?

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Additional indexation of pensions and annuities. Will it be there again this year?
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Additional indexation of pensions and annuities. The government will deal with the bill

As Wprost recalls, in his December statement, Donald Tusk announced the introduction of an additional indexation of benefits for pensioners and retirees. Currently, indexation takes place once a year – in March. The Ministry of Family, Labour and Social Policy has prepared a draft amendment to the Law on Pensions and Disability Pensions of the Social Security Fund, which will soon be discussed by the government.

Why is a second indexing necessary?

The Ministry emphasizes that in the current system, annual indexation is insufficient in a situation of high inflation. Pensioners, especially those with low benefits, suffer from a sharp increase in the prices of consumer goods and services, which causes their benefits to lose their real value. “They are often not enough to cover basic needs,” the Ministry states in its regulatory impact assessment.

It directly reminds that, according to the proposed solution, indexing would occur twice a year, if inflation exceeds in the first half of the year 5 percent Otherwise, the current annual indexation rules would apply. The additional indexation would be carried out according to the same mechanism as the annual indexation – by multiplying the benefit amount by the applicable indexation rate in August 31 of a given year.

It is important to note that the new regulations assume that additional indexation will not be able to reduce the benefit, even if the indexation rate is low.

When will the new rules come into effect?

According to the plan, the change in the law would come into effect January 1, 2025. This means that double indexing could be carried out as early as possible. in 2026if inflation exceeds the 5% limit.

A mechanism similar to the double increase in the minimum wage

The proposed double indexation mechanism is similar to the principle on which the double increase in the minimum wage was introduced. As in the case of the minimum wage, the indexation of pensions and annuities will be automatic if consumer inflation exceeds 5%. There have been two minimum wage increases in recent years. in 2023 and 2024although it is not yet known whether this situation will be repeated in the coming years.

The double increases in the minimum wage have provoked mixed reactions. Employers complain that the increase in wage costs leads to higher wage expectations also among workers who earn more than the national minimum wage. This causes wage pressure and increases labour costs, which is criticised by business associations.

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