The European Commission has put Poland on watch over its sweeping pension reforms, which will see part of the assets currently within its funded pillar transferred to the state’s Demographic Reserve Fund (FUS).
Reacting to development minister and deputy premier Mateusz Morawiecki’s pledge to close all existing open pension funds (OFEs) and transfer assets within the individual accounts to ZUS and the country’s third-pillar pension system, a spokesman for the Commission’s Directorate-General for Employment and Social Affairs (DG EMPL) noted the organisation of a country’s pension system was a matter for each member state.
However, the spokesman went on to stress previous advice to Poland to ensure the “sustainability and adequacy” of its pension system.
The recommendations were contained within the 2016 country report conducted as part of the European Semester, an annual audit of the fiscal impact of member state policy.
The spokesman further told IPE: “The Commission is following the intention announced by the Polish government to reform the funded pension system and will analyse in detail its possible impact on the sustainability and adequacy of pensions in the next European Semester.”
The European Commission has long placed an emphasis on the “adequate, safe and sustainable” nature of member states’ pension systems; the phrase featured repeatedly in its White Paper on Pensions published in 2012.
Poland’s reform is but the latest in a number of changes to the second-pillar system, coming after the previous government introduced a ‘slider’ rule, whereby OFE assets were gradually transferred to the Social Security Fund (ZUS) 10 years ahead of retirement.
The government also in 2014 legislated the transfer of all OFEs’ domestic sovereign debt holdings, equivalent to 51% of OFE assets, to ZUS and then cancelled the debt to lower Poland’s debt-to-GDP ratio.
The DG EMPL statement echoes one issued in the wake of the Hungarian government’s decision in 2010 to close its second-pillar pension system and transfer assets to the national treasury.
At the time, a spokeswoman for then-economic affairs commissioner Olli Rehn said the Commission was “concerned” by the move and questioned how it would impact the sustainability of the pension system.
Unlike Hungary’s reform, which amounted to wholesale nationalisation of the pensions savings, three-quarters of Poland’s OFE assets are to be transferred to individual retirement accounts (IKE), albeit to be split equally between savers without regard for their previous account balance.
The PLN103bn (€25bn) transfer to IKEs will consist of the second-pillar’s domestic equity holdings, while the remaining PLN35bn to be moved to FUS will include assets other than equities, thus avoiding any charges of nationalisation.
The final element of Poland’s proposed reform will see the launch of a new occupational savings system, Workers’ Capital Plans (PPKs), towards which employers and employees would each contribute 2%.