The Polish government may be softening its earlier stance on the decisions workers can make regarding their savings, while proposed changes to the second-pillar fund (OFE) system remain in the discussion stage.

In September, the government – in changing the system from a mandatory to a voluntary one – proposed to make the Polish Social Insurance Institution (ZUS) not only the default option but also an irrevocable one.

Workers who chose in the first instance to continue saving in the OFEs could subsequently change their minds and move over fully to ZUS.

Later that month, prime minister Donald Tusk indicated that those who defaulted to, or chose, ZUS could have a window every 2-3 years to switch back to an OFE.

The government has thus far circulated a document to the Sejm, the lower chamber of Parliament, detailing the history of the second-pillar system, the many stakeholder views and the reasoning behind its proposed overhaul.

The Polish Chamber of Pension Funds (IGTE) has pointed out that, in its summary of pension funds’ financial results, sourced to the Polish Financial Supervision Authority (KNF), the document has shrunk the aggregate profits made in 2012 from PLN37.4bn (€8.9bn), as stated in the KNF’s quarterly report, to PLN11.1bn.

According to the IGTE, this was yet another example of the government manipulating the facts to demonise the second pillar.

The most controversial proposal involves removing OFE holdings in Polish state and state guaranteed debt to ZUS, redeeming the debt and banning the funds from investing in these securities in future.

In October, deputy finance minister Wojciech Kowalczyk told the press the current 5% foreign investment limit – which the European Court of Justice ruled in December 2011 as being in violation of the free movement of capital – would be raised to 30% by 2016.

After the ruling, the government had envisaged a more gradual acceleration, to 30% by 2021, although it had not got round to changing the necessary legislation.

At the same time, Kowalczyk reiterated that the OFEs would nonetheless be banned from investing in foreign sovereign debt, as to do otherwise would be inconsistent.

He envisaged that there would be no problem with EU legislation in this respect.

The government has stressed it wants the OFEs to invest more of their assets in what it termed the “real economy”, essentially corporate and municipal bonds.

Even if the OFEs subsequently bought up all the issues on the market, they would not come close to replacing the PLN121.7bn of state bonds they held in their portfolios at the end of June.

According to Fitch Ratings’ quarterly review of the Polish non-governmental bond market, as of the end of the second quarter, outstanding corporate bonds of more than a year’s tenor totalled PLN34.2bn, and PLN16.1bn in the case of municipal bonds.

Furthermore, the local and regional governments are being put under tighter spending restrictions in 2014, which will reduce their need for issuing debt.

The ban on sovereign bonds could nevertheless prove the undoing for the proposed reform.

At the end of September, Irena Wóycicka, secretary of state in the presidential Cabinet, told the press the ban was questionable because it increased the risk for fund members by preventing the OFEs from investing in more stable instruments during periods of stock market decline.

While president Bronisław Komorowski has yet to issue a statement, he will ultimately have to sign off on the draft law, or alternatively return it to Parliament or refer it to the Constitutional Tribunal.