POLAND - The Polish supervisory authority KNF sees three major challenges for a reform of the Polish second pillar, including lower risk profiles and capital requirements.

The government is currently drafting laws on amendments to the mandatory second pillar which is in its tenth year now, a spokesman for the KNF told IPE.

No details on the amendments could be obtained before deadline but the KNF noted it sees three major challenges to be overcome in the system.

First of all, safer funds with a lower risk profile should be established for people approaching retirement.

Secondly, the capital requirements for pension companies should be linked to the size of the assets under management.

Currently the minimum amount of equity for a pension fund manager, PTE, has to be at least "the PLN equivalent of €5m", the spokesman explained.

"But it should depend on the size of the funds managed, for example 1% of the assets, to minimize the risk," he noted.

In case of a negative rate of return the pension fund companies have to pay the difference to a return of 0% from their own assets and in case of major losses this can lead to financial difficulties in some cases.

The third angle for a reform is the sale of pension contracts, the KNF pointed out.
It wants to see a halt put to "malpractice of funds' sales representatives" as "they mislead and abuse clients".

"We propose limiting their role in choosing fund," the spokesman concluded.

Data released by the KNF shows that Polish pension funds have managed a 3% return on their investments in the first half of 2009. Assets in the funds grew 10.9%, from PLN138.8bn (€33.9bn) to PLN153.9bn (€36.8bn).