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Poland

12 March 2018

Poland: voluntary pension scheme announced by the government

A long debated bill that leads to a reform of the three-pillar pension system has been drafted. The government formulated proposals for employer-sponsored pensions (PPK). The PPK-plan, which should start 1 January 2019, aims to bring up to 75% of the country’s employed population into occupational pension schemes through auto-enrolment. The unions have not taken a final stand in favour or against the proposed scheme.

The pension system in Poland was several times reformed in recent decades. The last reform in 2013 introduced far-reaching amendments to the three-pillar system, with the first and second pillars complemented by voluntary pension savings (see the ReformsWatch Background Summary). Already in 2011, the mandatory private open pension funds (OFE) were made to transfer 51.5% of their assets and all of their government bonds to the state-owned social security institution ZUS. Between 1 April 2014 and 31 July 2014, every person insured in the second pillar funds had to decide whether to keep the contributions there or to transfer all of them to ZUS; contributions remaining in the second pillar were gradually transferred to ZUS in a process beginning ten years before the person’s retirement.

The reforms of 2011 and 2013 resulted not only in an immense assets transfer from OFE to ZUS (around 153 billion PLN, roughly 36 billion euro) but also in a massive drop in the number of citizens insured in the second pillar as the sustainability of the second pillar pension funds came under pressure. Only 2.5 million persons or 18.3% of the 14 million eligible persons for the second pillar remained in OFE. The current prime-minister Mateusz Morawiecki formulated as Deputy PM the first ideas of restructuring the OFE pension funds in 2018, with a view to effectively dissolving them. However, notwithstanding the regulatory uncertainties over their future, the second-pillar pension plans (OFEs) recovered and delivered exceptional returns in 2017.

In early 2018, the government has come up with proposals for employer-sponsored pensions (PPK). The PPK plan, which is considered to start 1 January 2019, aims to bring up to 75% of the country’s workforce into occupational pension schemes through auto-enrolment. PPK will be obligatory for employers with 20 or more employees, and voluntary for employees. Employees will have to put a minimum of 2.0% of gross wages in the scheme with the option of up to a further 2% in voluntary contributions. Employers have to contribute a minimum of 1.5%, with 2.5% additional voluntary contributions. The state will only provide annual nominal bonuses of 58 euro. According to one of the architects of the program, the head of the state’s development fund, the plans will boost the countries savings. The idea is to open up the pension market for Polish investment fund firms with at least 3-year experience in investment fund management and at least 10 million PLN capital. The legislation requires funds to invest with care for the interests of participants and take into account the need to limit investment risk levels depending on the age of participants. The finance industry has criticised the exclusion of other asset managers, such as insurance companies and banks, as well as the pension fund companies (PPEs), which manage the second-pillar pension funds.

So far, the trade unions have not expressed final positions. Trade union Solidarność has informed its membership. In the past, it often backed up systems with private schemes, whilst trade union confederation OPZZ was more in favour of a model as introduced in Hungary.

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