Poland unveils tax-free retirement accounts
POLAND - Poland will launch the programme of individual tax-free retirement accounts in June 2004, the Labour Ministry has announced.
The programme comes later than expected. Originally, retirement accounts were to be introduced already at the beginning of this year.
Under the program, Poles will be allowed to set up pension portfolios comprising of investments into mutual funds, any capital investments or life insurance. The ceiling of these portfolios was set to 150% of the average Polish salary. Revenues from retirement accounts will be tax-free and will be available to their owners after age 60.
The Labour Ministry expects that some 1.5 million retirement accounts will be opened this year. The figure should rise to six million next year.
Poland is adopting retirement accounts in order to compensate for shortfalls in the current private pension savings scheme. Similar to other European countries, Poland can no longer rely on the pay-as-you-go retirement system alone, as its population is ageing.
Poland launched its pension reform in 1999. The reform is aimed at introducing a partly private system. As part of the reform, employers were allowed to provide supplementary pensions to their employees on a voluntary basis. This system has not seen broad acceptance so far.
On the other hand, private pension funds are highly successful. Mainly young people decide to transfer part of their compulsory monthly contributions to the private funds.
Poles pay a contribution of 19.52% of their salaries for pension insurance. Poland allowed for the creation of open pension funds in 2000. Currently, there are 16 pension funds operating on the market.