Polish govt approves pension reforms
Written by Natalie Tuck
The Polish government has approved a pension reform that will see all state-guaranteed private pension funds transferred to individual retirement accounts, according to a report by Reuters.
It is thought the reforms will add PLN 19.3bn (€4.5bn) to state funds. Under the plans, assets managed by OFE, a total of PLN 155bn (€36.4bn) will be transferred to 15.8 million individual retirement accounts.
The incumbent Law and Justice party has been wanting to change the way assets are managed by state-guaranteed private pension funds, called OFE, many of which are owned by foreign managers such as MetLife, NN Group or Aviva.
Under current law, the state insurance institution collects most mandatory contributions from employees, equivalent to 19.5 per cent of pre-tax earnings, and a smaller chunk is paid into OFE. The vast majority of the assets managed by OFE are shares in companies listed on the Warsaw Stock Exchange.
Quoted by Reuters, a government spokesperson said: “Such a system will create a basis for savings for the late years of life, and will contribute to building a safe and stable pension system, and consequently increase pension pay-outs.”
Savers’ private pension money will be transferred automatically to individual retirement accounts at a 15 per cent fee, unless workers actively express a will to move the money to a state social insurer. The government assumes that 80 per cent of workers’ money will be transferred to private retirement accounts.
According to central bank calculations, it would give the state PLN 19.3bn (€4.5bn).
According to Reuters, analysts have said that this money will help to balance the government’s budget. The cash injection may also help the government to scrap a plan to effectively increase pension premiums paid by high earners as of next year.
“There will be no real change for an average Pole, but the government will get money to finance 13th pension next year,” ING Bank senior economist, Karol Pogorzelski, told Reuters.
The government has said the reforms are to restore privacy to these pension funds but Pogorzelski believes it is to provide income to the government in the short term.
“According to government, the goal of the reform was to restore privacy to these funds, but I think that the main goal is to provide income to the budget in a short term,” said Krystian Jaworski, Credit Agricole’s senior economist.