Polish pension fund reforms to transform the current pay-as-you-go (PAYG) regime into a three pillar funded system are being delayed, following fears that the ZUS (central social security agency) computer system's inability to cope with the transition could lead to disaster.
The reforms are now to be implemented on April 1 1999 instead of January 1 next year, to allow time for information technology and organisational processes to be thoroughly tested before the changeover.
As a result pension fund and insurance companies will have to bear the cost of staff and equipment already hired for the transition, whilst receiving no revenue for the first quarter of next year.
The delay is expected to cost the companies around 1% of their expected investment. Registration for companies seeking to become pension fund providers has not been affected though, with applications for the expected 20-25 licences available having commenced on August 3.
Iain Batty, partner at Cameron McKenna law firm in London said: This is probably one of the most ambitious and complex projects in Europe at the moment , involving the transferral of several million pension accounts into the private sector, and I think the fear was that rushing into it could be a huge disaster. Many people felt a slight delay would ensure a safer transition, especially as the necessary technology was set to be installed as late as De-cember. "
Under the reforms, occupational pension schemes will now be mandatory for all employees under the age of 30, with workers between the ages of 30 and 50 having one year to reach a final decision over whether they wish to remain in the existing state scheme.
Consequently, of the current 45% of gross salary contributed by employers to the state, under the new system 9% of this will be paid into a pension scheme ofthe employee's choice.
This is expected to raise an estimated $25 bn in pension assets by 2005.
Simultaneously, Poland's first pillar system is to switch to a Swedish style virtual accounting programme, which will monitor occupational contributions and closely link these to state pension provision.
Defending the delay, Cezary Mech, president of UNSA, the Polish social security supervisory body, says the IT problems were compounded by government delays and organisational hitches due to the summer vacation.
" We felt it proper that such an important pensions change needed sufficient preparation time, which would not have been the case for a January start. We don't expect the 1% of investment this may cost pension fund and insurance companies, to be too damaging in the long run, " he adds."