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Polish pension fund overhaul postponed until July 2018

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The overhaul of the Polish pension fund system, initially earmarked for January 2018, looks set for a six-month delay.

Finance and economic development minister Mateusz Morawiecki, the co-author of the proposed changes, told the Polish Press Agency (PAP) today that he envisaged the new system coming into force at the start of next July.

Morawiecki cited the complexities of the reform, as well as the need for the State Social Insurance Institution (ZUS) to be ready for the changeover. The changes still require the agreement of other ministries.

Under the proposed system, the second-pillar pension funds (OFEs) would be dissolved, with 75% of the assets moving into newly created third-pillar individual pension insurance accounts (IKZEs) and the remainder into the ZUS-administered Demographic Reserve Fund (DRF).

In April Morawiecki announced that the relevant legislation would be published in June. Failure to meet this deadline led to local press speculation that both ZUS and the family, labour and social ministry wanted all OFE assets to transfer to the DRF.

Morawiecki told PAP that the differences in opinion were over technicalities, with the final legislation unlikely to differ much from his original plans.

He added that the DRF’s 25% share, while allocated to each individual’s pension account, should be deployed in the country’s economic development, preferably in the form of public-private partnerships rather than public investments.

The OFE’s assets totalled PLN174.7bn (€41.5bn) as of end-June, with equities accounting for more than 85% of the investment portfolio, according to the Polish Financial Supervision Authority.

The high equity share was responsible for the 23% year-on-year growth in Polish zloty terms, offsetting the effect of the “slider” – which incrementally moves each member’s assets to the ZUS when they are within 10 years of retirement.

While the slider is set to disappear under the proposed reform, in the short term its impact is expected to intensify.

Last year the legislature reversed the previous government’s gradual raising of the retirement age, enacted in 2012, from 60 years for women and 65 for men to 67 years. The lower retirement ages take effect at the start of October.

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