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The terms of granting old-age pension benefits in the old and new social insurance systems P 2/16

The terms of granting old-age pension benefits in the old and new social insurance systems

The introduction of a more beneficial way of calculating non-contributory periods in the case of persons born after 31 December 1948 does not infringe the principle of equality.

On 26 September at 1 p.m., the Constitutional Tribunal publicly delivered its ruling, issued at a sitting in camera with reference to the question of law submitted by the Circuit Court in Szczecin (the 6th Division – Labour and Social Insurance), with regard to the terms of granting old-age pension benefits in the old and new social insurance systems.

The Constitutional Tribunal adjudicated that Article 53(1)(3) of the Act of 17 December 1998 on Old-Age and Disability Pensions from the Social Insurance Fund (Journal of Laws of 2017, items 1383 and 1386) – insofar as it refers to the periods of parental leave mentioned in Article 7(5) of the said Act, which were used by insured persons born before 1 January 1949 – is consistent with Article 32(1) of the Constitution of the Republic of Poland.

The ruling was unanimous.

The Constitutional Tribunal held that the challenged provision did not infringe the constitutional principle of equality, despite the fact that it had introduced more beneficial ways of calculating the so-called non-contributory periods in the case of persons born after 31 December 1948.

When determining the so-called “initial capital” of an eligible person, with regard to non-contributory periods, the coefficient of 1.3% of the basis of assessment should be applied, whereas in the case of persons born before 1 January 1949 – the said coefficient is 0.7%.

The effect of the reform of the old-pension system is a distinction drawn between two main groups of eligible beneficiaries: persons born before 1 January 1949 and persons born after 31 December 1948, with regard to whom different old-age pension systems are applicable. The persons from the first group retire under the so-called defined benefits system, whereas the persons from the second group retire under the so-called defined contributions system.

The introduction of different legal schemes, based on the criterion of the date of birth was the main assumption underlying the reform of the old-age pension system and the introduction of the new terms of old-age and disability pension system.

As emphasised by the Tribunal, it is the legislator’s task to resolve such difficult dilemmas related to the selection of criteria on the basis of which differentiation is introduced with regard to eligible persons.

The legislator’s responsibility for the establishment of an effective social insurance system which would guarantee the plausibility of an old-age pension benefit is linked with considerable political discretion within the scope of shaping the system. The evaluation of the aptness of such solutions falls under political opinions (presented particularly by voters).

In such a situation, the Tribunal limits itself to the examination whether the choice of such criteria is justified and whether the said choice does not lead to the discrimination or manifestly unjust privileged status of certain categories of citizens.

Taking into account that the legislator’s objective was to introduce the new terms of calculating the amount of an old-age pension in a gradual manner and in the way that would be the least burdensome for the insured persons as well as to limit the progressive disparity between the amounts of average old-age pensions under the defined benefits system and the defined contributions system, the Tribunal held that the challenged provision meets the requirements concerning differentiation in the legal situation of particular groups of persons. The legislator did not violate the essence of the right to social security on the part of persons who receive benefits under the defined benefits system. He did not change the terms of calculating the amounts of old-age pensions, but he did introduce a more beneficial way of calculating the non-contributory periods in the case of eligible persons for whom the so-called “initial capital” is determined.

The Presiding Judge of the adjudicating bench was Judge Zbigniew Jędrzejewski, and the Judge Rapporteur was Judge Leon Kieres.