Polish government plans pension system overhaul

Assets accumulated in the funds, totalling PLN 162.3 billion (EUR 37.95 bn, USD 42.95 bn), will be transferred to individual pension accounts (IKE) or the state-owned social insurance fund, Poland’s IAR news agency reported.

Morawiecki said: “We want to put the pension system in order,” adding: “We want to rebuild the trust of Poles. Today, we are transferring these funds to society.”

The state-guaranteed private pension funds (OFE) are largely owned by foreign private asset management firms, including MetLife, NN Group or Aviva, Reuters reported.

Shifting the assets to individual pension accounts will require a fee, amounting to 15 percent of the transferred amount.

In 1999, ten years after the fall of the Iron Curtain, Poland introduced a three-pillar system that cleared OFEs to receive 7 percent of tax-payers' earnings, which were subsequently invested in the stock market and government bonds. Simultaneously, Poland's public social security body (ZUS) was set to receive 12.22 percent of citizens' yearly earnings.

However, owing to public debt, in 2011 the contributions to OFEs were curtailed to 2.3 percent, with the remainder going to ZUS.

In 2014, more than half of assets held by OFEs were transferred to ZUS under the previous Civic Platform government’s pension reforms. The changes introduced the option of choosing whether to transfer part of the pension contribution to OFE at all.

At present, ZUS collects most of the mandatory contributions from Polish employees, comprising 19.5 percent of their taxable income.

(aba)

Source: IAR