mast image

Special Report

Impact investing

Sections

Polish pensions raid ‘harmed credibility’ of future reforms – OECD

Related images

  • Old Town, Warsaw

Tags

Related Categories

Poland’s forced transfer of more than half the second pillar’s pension assets to the state social security fund (ZUS) undermines trust in its pension system and could harm the credibility of future reforms, the OECD has said.

The think tank also warned that the changes – which will see the open pension funds’ (OFE) ability to invest in fixed income restricted – could cut “already low future replacement rates”.

The report, part of the OECD’s regular economic surveys of its member states, continued: “Another result of the recent reforms will be somewhat less liquidity on the domestic Treasury bond market.

“Moreover, the cancellation of the OFEs’ Treasury bond holdings increased the share of non-resident investors in zloty-denominated public debt and curtail the participation of local investors with a long-term investment horizon.”

The OECD noted only two advantages of the transfer of assets, driven largely by the government’s desire to address increasing public debt perceived to be the result of second-pillar reforms that diverted part of the population’s pay-as-you-go contributions into the OFEs.

It said the “upsides” would be a reduction in debt-service payments and a fall in “high” OFE operating costs, although it speculated that a reduction in management costs could have also been achieved through better regulation of the funds forming the second pillar.

However, overall, its view of the pension changes seemed negative.

“The combination of the 1999 reform and its partial reversal might well damage social trust in the pension system and harm the credibility of future structural reforms more broadly,” the report said.

Plans to overhaul the structure of the pension system first became public last summer, as the government considered how best to design the 15-year old system’s payout phase.

At the time, the Polish Chamber of Pension Funds (IGTE) alleged that the information used by the government to make its case was “false and dishonestly presented”.

Polish president Bronisław Komorowski nevertheless signed the controversial bill into law at the beginning of January.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2543

    Asset class: Search of an Asset manager / Advisor managing / Advising a risk-based equity derivatives overlay program.
    Asset region: Global Developed Markets Equities, Global Emerging Markets Equities, Swiss Equities.
    Size: CHF 700-2100 million.
    Closing date: 2019-06-17.

  • QN-2544

    Asset class: Transitional Real Estate Debt.
    Asset region: North America (USA/Canada).
    Size: $50-100mn.
    Closing date: 2019-06-17.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here
<