POLAND - Two bills intended to complete Poland's pension reform had their first reading in the Polish Parliament on Friday and will now be passed to the parliamentary social insurance committee.
Although the Polish pension system was created a decade ago and the first pensions from private Polish pension funds are due to be paid next year, successive governments have failed to put a payout system in place until now.
The bill on funded pensions specifies two ways of paying pensions. A programmed withdrawal process will be provided by open pension funds to those who retire below the age of 65. And a single life annuity will be provided to those who retire at 65, which can be bought from new annuity companies.
The law stipulates annuities will be calculated on the back of unisex life tables.
It also gives a decreasing payback guarantee on survivor pensions should a pensioner die within three years of retiring. The heirs of a person who dies one year after buying an annuity will receive two-thirds of the capital used for its purchase, and will receive one-third after two years but get nothing after three years, at a linear decrease of 1/36 each month.
The second piece of legislation - a bill on life annuity funds - lays out the system for providing life annuities through annuity companies and details many of the financial requirements, including investment rules, indexation, and solvency regulations.
To avoid Solvency II regulations and to maintain domestic supervision of the annuity companies, these firms will not be explicit life insurance entities.
For the first five years, only women will receive pensions from the funded pension system because they can retire earlier than men. Women can retire at 60 whereas the retirement age for men is 65.
Women will be entitled to use a programmed withdrawal system until reaching the age of 65, at which time their retirement savings will be converted into individual life annuities.
The bills are intended to build an effective payout system by reducing costs by banning active client acquisition by annuity providers, as well as standardising products, creating single life annuities and providing guarantees through survivor pensions in the case of the death of a breadwinner.
They also introduce the indexation of life annuities through the participation of a retiree in any investment profits obtained by annuity provider.
At least 90% of this gain will be credited to the pensioner while at most 10% will go the account of the provider. Investment losses will be borne solely by provider.
In addition, the bills create a clearing house mechanism between providers for their life annuity reserves.
It is expected that the bills will be passed into law in the autumn.
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