POLAND - Investment regulations for Polish open pension funds (OPFs) are set to be loosened as part of the government's plan to divert some contributions from the second pensions pillar to the first pillar, IPE has learnt.

At the beginning of November, the Polish finance minister Jan Vincent-Rostowski and the labour minister Jolanta Fedak announced a proposal to cut contributions paid from the social insurance body ZUS to the mandatory second pillar from 7.3% to 3%. (See earlier IPE story: Poland plans cut to role of pension funds)

Along with this proposal, there are plans to amend the law governing pension fund investments, which until now has allowed pension funds to only invest up to 5% in foreign equities.

"Proposals for more flexible investment limits of those asset classes mentioned in the law from 27 August 1997 are being considered," a spokesman for the Polish prime minister told IPE.

The law behind the mandatory pensions system was established over 10 years ago and regulates investments in equities, bonds, loans, securities, investment certificates and mortgages.

It is highly likely that investment in real estate and alternatives will remain prohibited as these asset classes are not currently covered by the law behing second pillar pensions.

Officials stressed there was "no governmental plan to shift accumulated assets from OPF to the pension fund managed by the Social Insurance (SIF)" but confirmed there are plans to withhold some future contributions.

It was also confirmed that significant discussions concerning the government's moves were ongoing,  as pension industry  "disagrees" with the proposal to cut the contributions to OPFs.

In this earlier address from the finance ministry, officials said they would divert contributions destined for occupational pension plans straight to the ZUS, and this would in turn be used to purchase government bonds on behalf of the pension funds.

OPFs current government bond exposure of 60-80% of assets equalled "a duplication of the PAYG system", according to the prime minister's office.

The government argued this measure would decrease management costs for pension fund members.

See Pensions In Central and Eastern Europe in the January 2010 edition of IPE for a report on Polish pensions.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com