POLAND - The Polish social insurance body ZUS may be granted the right, from next summer, to manage the money that pension fund companies have to invest in government bonds.

The Polish finance and labour ministries announced in a joint press conference that the share of pension contributions going to mandatory second pillar funds will decrease from 7.3% to 3%.

Employers and employees currently pay 19.52% of their salaries in pension contributions, 12.22% of which goes into the first pillar.

Under current Polish asset allocation, pension fund companies (OFEs) must invest 60% of the money transferred to the second pillar in government bonds and the rest can be allocated freely as the companies wish, albeit there is a 5% cap on foreign equities.

The new system, which could come into effect as early as July 2010, would reduce the transfer of assets to the OFEs by passing the PLN13bn (€3.1bn) they invest annually in government bonds straight to ZUS to invest.

"We plan to make the change, which aims to reduce the operating costs of the open pension funds, so that future retirees could receive a higher pension", said Jolanta Fedak, the labour minister.

An additional effect of this measure would be to reduce the government's debt in the social security system, although government officials also claimed it would also considerably reduce pension fund fees as the size of the portfolios fell.

Pension fund fees have already been halved this year as part of an earlier overhaul of the system. (See earlier IPE story: Poland to reform pension sales activity)

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