Differences between Replacement Rates for Low-and High-Income Earners. 

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... Eurostat Figure 3 presents the progressivity indexes calculated using OECD Gini estimates for the studied CEE countries except Hungary, due to the lack of data. In the employed formula (2) as a proxy of Ginipensions the Gini coefficient for gross income (i.e. before taxes) in the population aged 65+ was applied, and as a proxy of Giniearnings the Gini coefficient for market income (i.e. before taxes and transfers) in the 18-64 age group was included. The coefficients of inequalities based on the gross and market income were chosen because the pension contributions are proportional to gross income. In this way, the impact of taxation on reducing income inequalities (if it is heavily progressive) in the working age generation is eliminated. The lowest progressivity is reported in Slovenia, and this pension system is closest to the Bismarckian type. However, over examined period of time the dispersion of progressivity indexes were noticeably reduced. Another indicator applied to empirically evaluate the level of redistribution in the examined CEE countries is the Bismarckian factor. In this analysis, the aggregated data from the Eurostat database is used. It comprises the EU Survey of Income and Living Conditions (EU-SILC). The Bismarckian factor has been evaluated in a simplified procedure, i.e. using publicly available aggregated estimates, not microdata. This approach can bias the results to some extent, so they will serve only as an approximation of the level of redistribution. The ratio S80/S20(65+) as well as the shares of the top and bottom quintiles of the income distribution in a society are applied in the formula (8). Similarly to the study of Krieger and Traub (2008), the net incomes are taken into account. The results are in line with previous findings, i.e. the pension system in Slovenia can be characterized as Bismarckian, where pension benefits are most closely linked to the earnings. In case of Slovenia, the reported Bismarckian factor exceeds 1. This is a result of the negative difference between the income inequality ratios in the working age generation and the generation of the elderly. This is clearly visible when comparing Figure 2. As argued in the previous section, the Bismarckian factor is to a great extent determined by the magnitude of the difference that forms the condition for α to be smaller than 1 i.e. P B Y T -P T Y B >0, which can be also expressed as the difference between the income inequality ratios in both generations i.e. Y T /Y B and P T /P B , but also as the difference between the replacement rates given for the cohorts from the first and the last quintile of the income distribution, i.e. P B /Y B and P T /Y T . The same applies to the RS ratio, however, contrary to α it is exclusively dependent on the relation between these two factors. Figure 5 presents the differences in the replacement rates for the model low-income agents and high-income agents, provided by OECD database. They are theoretical replacement rates estimated based on several assumptions. It was assumed that these rates apply to 20-year-old people, single, entering the labour market in 2012 and continuing their careers without interruption, until retirement age as stipulated by law in each country. The calculations made are subject to the rules characteristic for pension system in each country at the moment of creating a model (assuming the rules are constant over time) and relate to the expected benefits pension from both the public and from private pension plans, including those quasi-mandatory if only they cover at least 85% of the working population. Net Replacement Rate pensioners, thus they are based on the cross sectional, not longitudinal, data, and require the assumption that between two generations there is no re-ranking of the income and benefit positions. Analysis of the theoretical projected replacement rates comprises the incomes of today's working generation and their benefits simulated for the future, thus it enables the assessment of the current pension system design. As shown, the greatest disparity between the projected pension benefit adequacy of low- income earners and high-income earners is observed in the case of Czech Republic (above 40 percentage points) and Estonia (around 20 percentage points). Significantly lower differences are estimated for Slovakia and Slovenia, whereas for Hungary and Poland the estimated replacement rates are almost equally proportional to the previous earnings regardless of the level of earnings. This implies that the current pension systems in the Czech Republic and Estonia (as of 2012) are much more redistributive than in other countries, as low-income earners will have higher replacement rates in the future than high-income earners. It is worth noting that no difference between men and women (except for a small disparity in Slovenia) occurs, which indicates that redistribution between these two groups is ...