Marcin Żółtek (pictured), CEO of PZU TFI, one of Poland’s largest managers of DC pension savings, tells Jakub Janas and Carlo Svaluto Moreolo about the firm’s role in the Polish pension system


Central and Eastern European countries cannot compete with their Western or Northern European peers when it comes to the size of their pension assets. Three-pillar pension systems, based on the approach sponsored by the World Bank, were implemented in the region three decades ago, after the collapse of the Iron Curtain. However, because of a variety of reasons, including counter-reforms that nationalised private pension assets, the region’s pension systems failed to develop substantially. 

In recent years, however, they have started to evolve thanks to the implementation of auto-enrolment reforms, such as those introduced in Poland and Lithuania in 2019. These reforms contributed to a significant growth of pension assets in the countries involved. 

Poland is a notable example. Since implementation in 2019, pension assets in the country have grown to €2.8bn and are expected to continue growing steadily. Although auto-enrolment participation is still low – around 35% as of January this year – in March the first wave of auto-enrolment begins for those workers who have already opted out once. Participation in second and third-pillar pension funds is expected to rise significantly as a result.

One of the largest beneficiaries of the Polish auto-enrolment reform is PZU Group, the country’s oldest insurance company, which dates back to 1803. Its large product range includes property, accident and life insurance as well as pension products, fund management and financial brokerage services. In 1991 it became a joint stock company controlled by the state treasury. Today PZU Group manages €6.4bn of assets, which makes it one of the largest and most influential financial institutions in the region.

PZU TFI, the group’s investment division with strong focus on pension assets, is led by Marcin Żółtek, an experienced manager with a strong local understanding of the market, that was gained through directorial positions he held at two other pension funds. Żółtek has been CEO of the business since 2017 and became deputy chairman of the group’s management board in 2019 – an appointment that underscores the importance of pensions for the group. 

The PZU TFI board is responsible for managing two key products – the PPE, a voluntary third-pillar product, and ‘employee capi­tal plans’ (Pracownicze Plany Kapitałowe, or PPK), the auto-enrolment solution inspired by the UK’s NEST and New Zealand’s KiwiSaver pension schemes. The strategic and commercial decisions taken by the company’s board are keenly observed by local market participants, given PZU TFI’s status as the second-largest pension fund in Poland in terms of assets gathered via the auto-enrolment programme.

PZU TFI’s launched its first PPE scheme in 2004. Since then, it has collected the equivalent of €1.4bn from savers – 40% of all PPE assets in the country. The PPK scheme, which was first rolled out in 2019, has gathered €600m.

“The recent auto-enrolment reform was really a major change for our business model. From the asset management point of view, it’s a great product, and definitely changing our scale of operation. One has to remember that despite 30 years of transformation, we are at a very early stage. The size of Poland’s capital markets is relatively small compared to its GDP. As asset managers in Poland are, in fact, struggling with economies of scale, the PPK is definitely bringing a steady flow of regular payments, which makes the system not only much more stable but also safer for us. It also makes it easier to plan our activities,” says Żółtek.”

“The recent auto-enrolment reform was really a major change for our business model. From the asset management point of view, it’s a great product, and definitely changing our scale of operation”

PZU TFI’s investment strategy is constrained by regulatory limitations, which do not apply to the retail investment products offered by the group. The share of bonds and equities is relatively stable and has offered attractive returns until recently. Within the PPE product, all the assets can be invested outside of Poland, while the maximum allocation to foreign assets in PPK funds is set at 30%. PZU TFI’s currently invests around 15% of the assets abroad, 30% of which is invested in international equities, split 50/50 between Europe and the US. Emerging markets are not considered, as the fund can only invest in Organisation for Economic Co-operation and Development (OECD) countries.

PZU Apr2023

Żółtek says that PZU TFI strives to maintain a long-term approach to strategic asset allocation for its PPK product. “Long-term returns will matter more than trying to beat the benchmark on a short-term basis,” he says. Strategic changes are typically implemented on a quarterly basis by the strategic asset allocation committee. At the same time, the tactical asset allocation is formally reviewed on a bi-weekly basis, with some small alterations and reviews also done on a daily basis.

PZU TFI differs from its peers in a number of ways, according to Żółtek. He says: “My intuition tells me that we are definitely much more active in foreign investments. 

“It’s also due to the fact that we are perhaps the largest asset manager here in Poland, in terms of number of employees. The team of economists, analysts and in-house portfolio managers that generates our own investment strategies gives us the opportunity to take a broader look at the investment universe.” 

Other investors in the country, says Żółtek, tend to prefer index-based products as opposed to stock picking based on in-house research. But its diversified and more active investment strategy is also possible thanks to PZU’s standing as the largest Polish insurer and a key market player that contributes to the development of the financial ecosystem in Poland. 

“Because we are that large, we run a lot of strategies and a lot of asset classes ourselves. So it makes sense to provide the same know-how and the same quality to our pension plans members. It is a unique feature in the local market,” Żółtek says. 

Because of the limits on assets invested in foreign markets, PZU TFI can only make limited use of external managers. “It is very difficult to externalise asset management activities, especially in more sophisticated asset classes, because the costs involved make it inefficient in this current set-up.” 

The situation, however, might change thanks to the slow but steady rise in auto-enrolment membership and assets. There is a strong chance that industry leaders and policymakers will start a discussion that might lead to a relaxation of the rules, and ultimately an increase in diversification. There is also growing interest in investing in private markets which, for now, is firmly regulated and limited.

“Polish investors are not familiar with using external managers. We do not have sufficient procedures and sufficient experience in selecting them. In my experience, there have been various opportunities to use external managers for alternative investments. However, I can name only two pension funds from the pool of over 15 that did use them for that,” Żółtek says.

As the size of Polish pension funds grows, investors will seek to allocate a growing share to alternatives, and smaller pension funds which lack in-house expertise, might need to increasingly rely on external managers. The situation for PZU TFI is different; with almost one-quarter of the overall pension assets, the fund has the scale to keep investment operations in-house.

Growing pension assets also means a greater focus on sustainability issues. Żółtek says: “Sustainability is definitely among the top three concerns, along with generating positive returns for our clients and maintaining risk at acceptable levels. 

“In the West, the main issue relating to ESG is greenwashing. In Poland, we face a different dilemma, with very few people understanding ESG and sustainability, especially from a risk and investment perspective. ESG is seen as a box that needs ticking, rather than proactively trying to envisage what is needed and what can actually be beneficial. It’s perceived more as a reporting exercise than a strategic exercise.”

However, Żółtek says that the PZU asset management division aims to be a pioneer, especially since the current development of sustainable investing in Poland and in the region is going in a direction that “is not necessarily favourable”. 

Poland’s auto-enrolment reform

In January 2019, Poland’s automatic enrolment programme, consisting of ‘employee capital plans’ (Pracownicze Plany Kapitałowe, or PPK) came into force. Since then, workers aged 18 to 55 are automatically enrolled into a DC pension scheme, with the possibility of opting out. A new wave of auto-enrolment for those who had opted out in 2019 started in March this year. Membership of occupational DC schemes (Pracownicze Programy Emerytalne, or PPE) remains voluntary for anyone aged between 18 to 70 years of age, with a basic minimum employer contribution of 3.5%.

Workers enrolled in the PPK programme contribute a minimum of 2% of gross salary, which can be increased up to 4% or decreased to 0.5% if the salary level is lower than 120% of the minimum wage. Employers contribute a minimum of 1.5% and up to 4%, while the state offers a ‘welcome payment’ of PLN250 (€53), plus an annual sum of PLN240 under certain conditions. Under the current framework, savers can also withdraw some money from the PPK tax-free after the age of 60.

Last year, Żółtek and his team started the process to change attitudes within the organisation. All of the company’s assets, including insurance and pensions, were screened from an ESG perspective. This was complemented by an assessment of the company’s methodologies. The risk management strategy was also modified by introducing meaningful limits in terms of ESG scores. 

Żółtek says: “The most important thing is that we are now proactively developing investment strategies and funds using both internal and external methodologies, including ESG scores.” 

At least a portion of the strategies and funds offered by PZU asset management will be using these methodologies, including the firm’s pension assets.

“What makes us different is that we have sufficient scale and the decision-making process. We are looking to really offer products where we apply a higher level of control and scrutiny on whether a specific investment is actually ESG-compliant.” 

“What makes us different is that we are we have sufficient scale and the decision-making process. We are looking to really offer products where we apply a higher level of control and scrutiny on whether a specific investment is actually ESG-compliant”

As Żółtek says, “most of the other asset managers in Poland and in the region tend to buy external funds that have ESG features, or external ETF products, without necessarily adding too much consideration of what the ESG component means. Moreover, those investments are then done outside of the country, as ESG investing in Poland, until recently, was in the vast majority of cases about investing in Western Europe or the US. And our attitude is to change this.”

On a practical level, from this year PZU TFI plans to publish reports on its green funds, which hopefully will set a standard for the local market. It also plans to offer new investment strategies and asset classes to clients. This will hopefully benefit pension savers.

Żółtek is optimistic about the new auto-enrolment round that started in March. He says: “Although the launch of the PPK was not as spectacular as everyone expected, the new auto-enrolment round will give us the possibility to contact our clients and show the results and the benefits. Despite the very turbulent market, those who decided to join four years ago should be really satisfied with the performance. I believe it now gives us a chance to communicate how others have built wealth and how new members can get engaged.”