Poland’s second-pillar pension funds (OFEs) returned a 12-month weighted average of 27.8% as at the end of September according to the Polish Financial Supervision Authority (KNF).
Of the 12 funds in the KNF’s calculations, PZU Złota Jesień generated the highest return (29.8%), and Aegon the lowest (23.5%).
Longer-term average returns were also impressive: 19.1% for three years, 42.2% for five years, and 57% for 10 years.
As reported previously, the OFEs’ heavy weighting in equities since the pension reforms of 2014 have tied their performance to that of the Warsaw Stock Exchange (WSE).
According to Polish brokerage Trigon, in September Polish equities accounted for 79% of the aggregate portfolio, foreign equities a further 6.6%.
The WSE has been one of this year’s best performing European equity markets, with its benchmark WIG index rising by 36.5% over the 12 months to the end of September, while the WIG 20 index of the exchange’s 20 biggest capitalised companies grew by 43.5%.
Furthermore, on 29 September Poland became the first CEE economy to be upgraded by FTSE Russell from emerging to developed market status, bringing some domestic stocks into updated indices.
The OFEs themselves account for around 14% of Polish institutional investor trades on the WSE’s main market.
Investment returns, along with dividends, increased the size of the OFEs’ aggregate portfolios by 27.2% year-on-year in local currency terms to PLN179.8bn (€42.1bn) according to the KNF.
This growth offset the net outflows of the “slider” for members with 10 or fewer years left to retirement to the Polish Social Insurance Institution (ZUS).
According to Trigon, in the first nine months of the year the slider transferred PLN3.1bn to ZUS, against PLN2.2bn of inflows from members who elected to continue contributing to the OFEs.
As of October, following the implementation of lower retirement ages, net outflows under the slider accelerated.
Regulator approves Aegon-Nordea OFE deal
In separate news, the number of OFEs is shortly set to shrink to 11 following the KNF’s approval in September to allow Aegon pension fund management company to take over Nordea’s OFE, with the merger of the two funds set for 17 November.
The deal was first agreed last summer, and is set to push Aegon from the 10th largest to fourth largest provider in the country according to KNF data.
Reform timeline uncertain
Meanwhile, the timeline of the overhaul of the Polish pension system – which would liquidate the OFEs, transfer 75% into newly created third-pillar accounts and the remainder to the first pillar – remains uncertain.
The project remains out for consultation, and in September finance and economic development minister Mateusz Morawiecki emphasised again that it would be implemented in 2018.
However, the published 2018 budget has not mentioned the new system, notably the impact of the slider’s disappearance on the first pillar, leading to local press speculation that the overhaul may have to wait until the following year.